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Author Question: Define gross investment and net investment. Discuss the relationship between gross investment and ... (Read 152 times)

mcmcdaniel

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on: Jun 29, 2018
Define gross investment and net investment. Discuss the relationship between gross investment and net investment.
 
  What will be an ideal response?

Question 2

Assume the inflation rate falls from 4 percent to 2 percent. This means that
 
  A) the price level has fallen.
  B) the price level is increasing more slowly.
  C) the economy is experiencing deflation.
  D) real GDP is decreasing.
Macroeconomics: Principles, Applications and Tools ¦ O'Sullivan, Sheffrin, Perez ¦ 7th Edition
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zhanghao

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Reply #1 on: Jun 29, 2018
Answer to Question 1

Gross investment is the total amount spent on new capital goods to increase the quantity of capital and replace the depreciated capital. Net investment is the amount spent on new capital that exceeds the value of the depreciated capital or, in other words, net investment equals gross investment minus depreciation. Net investment is equal to the change in the capital stock.

Answer to Question 2

B


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