"When a company's depreciation is larger than its gross investment, net investment becomes negative and the firm's capital stock decreases." Is the previous statement correct or incorrect? Explain your answer
What will be an ideal response?
The statement is correct. Net investment equals gross investment minus depreciation. If depreciation is larger than gross investment, net investment will be negative. Net investment is the change in the capital stock, and so the company's capital stock decreases. Essentially, because depreciation is larger than the company's gross investment, the company is not buying enough capital to replace the capital that depreciated. As a result, the total amount of the company's capital decreases.
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Bobby was researching the economic growth of a country between 2006 and 2011. Using 2006 as the base year, he calculated a twelve percent increase for real GDP and a ten percent increase for nominal GDP. His results indicate that
A) he made an error when calculating nominal GDP. B) the quantity of goods and services produced decreased over the period. C) the quantity of goods and services produced increased and prices decreased over the period. D) the quantity of goods and services produced and prices both decreased over the period. E) the quantity of goods and services produced did not change and prices decreased over the period.
Three factories in Stinky City emit high quantities of sulfur dioxide into the local environment. The city government decides to set up a ____________________ that divides the allowable amount of this pollutant between the three companies. The companies can buy and sell these instruments, but the allowable amount of emissions goes down every year.
a. marketable permit program b. pollution charge c. pollution credit d. fine system
When a resource supply curve slopes upward, as it usually does, earnings consist of both opportunity cost and ________ ________
a. actual costs b. economic rent c. actual pay d. it only consists of opportunity costs
Which of the following statements best illustrates the form of an economic theory?
A. If A, then B. B. If A, then B, when C, D, E, and F are also changing. C. A, B, and C all occurred at the same time. D. If A, then B, other things held constant.