a) Gross and net investment

a) distinction between gross and net investment

investment

• → more capital/consumer goods purchased/produced

• → higher RGDP/productive efficiency

depreciation = decrease in monetary value of a capital good over time

gross investment = investment including

→ replacement of old capital goods + addition of new capital goods

net investment = investment including

→ only addition of new capital goods

net investment represents economic growth more accurately

• replacing old capital goods

  • → produces same amount of consumer goods

  • → does not increase RGDP/productive efficiency