Question

Which one of the following is true? Net investment is equal to:

• A. Gross Investment - Cost
• B. Gross Investment - Depreciation
• C. Gross Investment - Marginal Investment
• D. Gross investment - Net Profit

Hint:

Net investment accounts for depreciation and reflects the actual increase in capital stock.

Answer 1

The Correct Option is B

Step 1: Concept of gross and net investment.
Gross investment refers to the total investment made by a firm in a given period, including the replacement of worn-out capital. Net investment is the amount by which the capital stock increases, i.e., it accounts for depreciation.
Step 2: Relationship between net investment and depreciation.
Net investment is calculated by subtracting depreciation (the wear and tear on capital) from gross investment, as depreciation reduces the effective increase in capital.
Step 3: Conclusion.
Thus, the correct answer is (B) Gross Investment - Depreciation. Final Answer: \[ \boxed{\text{Gross Investment - Depreciation.}} \]