In the Solow model, net investment is defined as:
A) investment plus capital depreciation
B) investment minus capital depreciation
C) the saving rate minus the depreciation rate
D) the saving rate plus the depreciation rate
E) None of these answers are correct.

Question

Quizplus · Accepted Answer

Net investment is the amount that the economy adds to its stock of capital in a period, which is equal to investment minus capital depreciation. Therefore, option B is the correct definition of net investment in the Solow model.

In the Solow Model, Net Investment Is Defined As