Capital stock in an economy is measured by net investment or new capital formation, which is expressed as : Net Investment = Gross investment - Depreciation Here, Depreciation is an annual allowance for wear and tear of a capital good. In other words it is the cost of the good divided by the number of years of its useful life.

Net Investment = Gross investment - Depreciation Capital stock in an economy is measured by net investment or new capital formation, which is expressed as : Net Investment = Gross investment - Depreciation Here, Depreciation is an annual allowance for wear and tear of a capital good. In other words it is the cost of the good divided by the number of years of its useful life.

Which of the following is correct about 'Net Investment' in an economy?

Q. Which of the following is correct about 'Net Investment' in an economy?
Answer: Net Investment = Gross investment - Depreciation
Notes: Capital stock in an economy is measured by net investment or new capital formation, which is expressed as :

Net Investment = Gross investment - Depreciation

Here, Depreciation is an annual allowance for wear and tear of a capital good. In other words it is the cost of the good divided by the number of years of its useful life.

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