Assertion (A): Net investment adds to the capital stock of an economy.
Reason (R): Gross investment includes the replacement of capital that has worn out.

Both A and R are true, and R is the correct explanation of A.Correct answerYour answerBoth A and R are true, but R is not the correct explanation of A.Correct answerYour answerA is true, but R is false.Correct answerYour answerA is false, but R is true.Correct answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer B

Correct answer: B

A is true: net investment is the addition left after replacing worn-out capital.
R is also true, but it describes gross investment; it does not explain why net investment adds to the stock.

Concept: Net investment and the capital stock
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsInvestment and depreciation

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Ten questions from Basic Concepts & the Circular Flow, at your own pace.

Assertion (A): Net investment adds to the capital stock of an economy.Reason (R): Gross investment includes the replacement of capital that has worn out.

Explanation

Assertion (A): Net investment adds to the capital stock of an economy.
Reason (R): Gross investment includes the replacement of capital that has worn out.