In the reservoir analogy of stock and flow for the economy:
A) Gross investment is an outflow and depreciation is an inflow
B) The stock of capital is an outflow and depreciation is an inflow
C) Net investment is an inflow and the stock of capital is an outflow
D) Gross investment is an inflow and depreciation is an outflow

Question

Quizplus · Accepted Answer

Gross investment refers to the inflow of new capital into the economy, as it represents the addition to the existing stock of capital. Depreciation, on the other hand, refers to the outflow of capital resources from the economy, as they are consumed or become obsolete over time. Therefore, gross investment is an inflow while depreciation is an outflow in the stock and flow model of the economy.

In the Reservoir Analogy of Stock and Flow for the Economy