Which of the following is a correct expression?
Show answer & explanation
Correct answer: C
Explanation
The correct answer is option 3 i.e. Net investment = Gross investment - Depreciation.
The formula for net investment is indeed:
Net Investment = Gross Investment − Depreciation
This equation signifies that the net investment is the total amount of investment in capital (gross investment) minus the depreciation on that capital. Depreciation refers to the decrease in value of assets over time, particularly due to wear and tear. So, the net investment gives us the effective addition to the capital stock.