McqMate
| Q. |
Investment is equal to - |
| A. | gross total of all types of physical capital assets |
| B. | gross total of all capital assets minus wear and tear |
| C. | stock of plants, machines and equipments |
| D. | None of these |
| Answer» B. gross total of all capital assets minus wear and tear | |
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Explanation: Investment" is a broader concept that includes investment in all kinds of capital assets, whether physical property or financial assets. In economic statistics and accounts, capital formation can be valued gross, i.e., before deduction of consumption of fixed capital (or "depreciation"), or net, i.e. after deduction of "depreciation" write-offs. The net valuation method views "depreciation" as the compensation for the cost of replacing fixed equipment used up or worn out, which must be deducted from the total investment volume to obtain a measure of the "real" value of investments: the depreciation write-off compensates and cancels out the loss in capital value of assets used due to wear & tear, obsolescence, etc. |
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