When firms buy new capital,it is called
A) investment.
B) net investment.
C) depreciation.
D) a steady state.
E) an unstable state.

Question

Quizplus · Accepted Answer

The purchase of new capital goods by a firm is referred to as investment. This is because the firm is investing in its future production capabilities by acquiring new equipment or machinery. Net investment, on the other hand, takes into account the change in the stock of capital goods over a period of time, and reflects the net change in investment after accounting for depreciation. Depreciation is the decrease in value of capital goods over time, and does not refer to the purchase of new capital goods. A steady state or unstable state refer to different levels of equilibrium in an economic system and are not directly related to the purchase of new capital goods by firms.

When Firms Buy New Capital,it Is Called