What is deducted from the gross investment to get the net investment?

Correct option is D

​Correct Answer:(d) Depreciation​

To calculate net investment, depreciation is subtracted from gross investment.

Key Terms:

1. Gross Investment: Total expenditure on new capital goods, including replacement of worn-out or obsolete assets.
2. Depreciation: The reduction in the value of an asset over time due to wear and tear, aging, or obsolescence.
3. Net Investment: The portion of gross investment that adds to the capital stock, calculated as: Net Investment=Gross Investment−Depreciation\text{Net Investment} = \text{Gross Investment} - \text{Depreciation}

For example:
If gross investment is ₹100,000 and depreciation is ₹20,000:

Net Investment=₹100,000−₹20,000=₹80,000\text{Net Investment} = ₹100,000 - ₹20,000 = ₹80,000

Importance:

• Net Investment indicates the actual increase in the productive capacity of the economy.
• If net investment is positive, it means the capital stock is increasing; if negative, it is decreasing.

Information Booster:
● Depreciation reflects the cost of maintaining existing capital stock.
● Gross investment includes both replacement and new investments, whereas net investment focuses on new additions.
● Depreciation is also known as "capital consumption allowance" in economic terms.
● A growing economy typically shows consistent positive net investment.