What is the difference between gross investment and net investment?
A)net investment = gross investment minus taxes
B)net investment = gross investment minus net factor payments
C)net investment = gross investment minus inventory accumulation
D)net investment = gross investment minus depreciation

Question

Quizplus · Accepted Answer

Net investment is gross investment minus depreciation, since depreciation represents the decrease in the value of capital stock due to wear and tear or obsolescence. Option A is incorrect because taxes are not directly related to investment. Option B is incorrect because net factor payments include payments to capital and labor, which are related to income distribution, but not to investment. Option C is incorrect because inventory accumulation is a component of gross investment, but not the only one.

What Is the Difference Between Gross Investment and Net Investment