Technological advances affect the net capital stock by
A) reducing the volatility of investment
B) inducing obsolescence
C) lowering the marginal product of capital
D) shrinking the gap between gross and net investment
E) raising the aggregate gearing of firms

Question

Quizplus · Accepted Answer

Technological advances can lead to the obsolescence of existing capital, forcing firms to invest in newer technology to remain competitive. This can reduce the net capital stock as old equipment becomes obsolete and is either sold or scrapped.

Technological Advances Affect the Net Capital Stock by