Which one of the following is TRUE?
A) Net investment is negative when gross investment is greater than depreciation.
B) Our productive capacity declines when net investment is less than zero.
C) Negative net investment occurs when imports are less than exports.
D) Negative net investment occurs when exports are less than imports.

Question

Quizplus · Accepted Answer

Net investment is calculated as gross investment minus depreciation. If net investment is less than zero, it means that the amount of capital stock is declining instead of increasing. Therefore, our productive capacity declines when net investment is less than zero. Option A is incorrect as the given scenario would result in positive net investment. Option C and D are incorrect as they relate to balance of trade and not investment.

Which One of the Following Is TRUE