Question

If in some year gross investment was $120 billion and net investment was $65 billion, then in that year the country's capital stock

A. may have either increased or decreased

B. increased by $65 billion

C. increased by $55 billion

D. decreased by $55 billion.

Answer 1

If in some year gross investment was $120 billion and net investment was $65 billion, then in that year the country's capital stock:

A. may have either increased or decreased

Explanation: Gross investment refers to the total amount of investment made in a country, including replacement of depreciated capital. Net investment, on the other hand, is the gross investment minus the amount of depreciation.

Capital stock represents the total value of all the physical assets (such as machinery, equipment, buildings, etc.) in an economy at a specific point in time. It is the accumulation of past investments and represents the country's overall productive capacity.

To determine the change in capital stock, we need to consider the relationship between gross investment, net investment, and depreciation:

Net Investment = Gross Investment - Depreciation

If net investment is positive, it means gross investment is greater than depreciation, and the capital stock increases.

If net investment is negative, it means gross investment is less than depreciation, and the capital stock decreases.

In this case: Gross Investment = $120 billion Net Investment = $65 billion

Since the net investment is positive ($65 billion), it means the gross investment was greater than depreciation. Therefore, the country's capital stock (productive capacity) in that year may have increased or decreased depending on the specific amount of depreciation.

Option A is the correct answer. The capital stock may have either increased or decreased in that year. We cannot determine the exact change in capital stock without information about the depreciation amount.

Answer 2

B. increased by $65 billion

Because we consider net investment as it reflects the real change

the above is answer..

Answer 3

Let's analyze the information given:

Gross investment = $120 billion Net investment = $65 billion

Gross investment refers to the total investment made in a country during a particular year, including both new investments and replacement investments. Net investment, on the other hand, is the gross investment minus the depreciation (wear and tear) of existing capital.

Now, let's consider the formula for calculating net investment:

Net Investment = Gross Investment - Depreciation

To find the country's capital stock change, we can rearrange the formula as follows:

Capital Stock Change = Gross Investment - Net Investment

Substituting the given values:

Capital Stock Change = $120 billion - $65 billion Capital Stock Change = $55 billion

Now, to answer the question:

In that year, the country's capital stock changed by $55 billion.

Therefore, the correct answer is C. increased by $55 billion.