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Question
What occurs when \[I_g>I_r\]?
Options
Ex-post investment is equal to ex-ante investment
Net investment is zero and existing capital is merely maintained
Net investment is positive and there is capital accumulation
Net investment is negative and capital stock is shrinking
MCQ
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Solution
When Gross Investment exceeds Replacement Investment, there is a positive net addition to capital. This condition is capital accumulation, indicating that the economy is growing.
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