Question

An economy’s capital stock was $46.3 billion at the end of 2016, $46.6 billion at the end of 2017, and $47.0 billion at the end of 2018. Depreciation in 2017 was $2.4 billion, and gross investment during 2018 was $2.8 billion (all in 2007 dollars).

1. Calculate net investment and gross investment during 2017.
2. Calculate depreciation and net investment during 2018.

Answer 1

$Net Investment_{2017}=C.S_{2017}-C.S_{2016}$

$=4.66-4.63=0.03 billions$

Where C.S is capital stock.

$Gross Investment_{2017}=Net Investment+ Depreciation$

$=0.03+2.4=2.43 billions$

$Net Investment_{2018}=4.7-4.66=0.04 billions$

$Depreciation= Gross Investment- Net Investment$

$=3.8-0.04= 2.76 Billions$