Explain the relationship among the capital stock, gross investment, net investment, and depreciation
What will be an ideal response?
The capital stock is the total quantity of plant, equipment, buildings and inventories. Some of this capital stock is always depreciating or wearing out. During a year a firm will purchase new capital. The amount of capital purchased is gross investment. The amount of gross investment minus the amount of depreciation during a year is net investment. So net investment is the change in the capital stock from one period to the next.
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You need a new computer, and you will need a loan in order to buy one. Which lender is most likely to charge you the highest interest rate on your loan?
(A) Savings bank (B) Savings and loan association (C) Credit union (D) Finance company
The amount of output a firm can produce with a given quantity of fixed and variable inputs is called:
A) total product. B) average variable product. C) marginal product. D) total fixed product.