When net investment is positive
A) replacement investment exceeds gross investment.
B) the government is running a surplus.
C) exports exceed imports.
D) the capital stock grows from one year to the next.
E) consumption must exceed government purchases.

Question

Quizplus · Accepted Answer

When net investment is positive, it means that gross investment (total investment in new capital goods) is higher than depreciation (the decrease in the value of existing capital goods due to wear and tear). This leads to an increase in the stock of capital goods from one year to the next. Therefore, option D is the correct choice. Option A (replacement investment exceeds gross investment) is incorrect because it refers to the opposite situation where net investment is negative. Option B (government surplus) and E (consumption exceeding government purchases) are unrelated to net investment. Option C (exports exceeding imports) is related to net exports, not net investment.

When Net Investment Is Positive