what is the difference between gross investment and net investment?
Dear Student,
Gross investment comprises of the total expenditure incurred on capital goods (such as plants, machinery, etc.).While, net investment refers to the total value of investment in the capital goods after taking account of depreciation. It is calculated by subtracting depreciation from gross investment.
Thus, we can say that the only difference between gross investment and net investment is that, while gross investment includes depreciation, net investment does not. That is, Algebraically,
Net Investment = Gross Investment – Depreciation
Gross investment comprises of the total expenditure incurred on capital goods (such as plants, machinery, etc.).While, net investment refers to the total value of investment in the capital goods after taking account of depreciation. It is calculated by subtracting depreciation from gross investment.
Thus, we can say that the only difference between gross investment and net investment is that, while gross investment includes depreciation, net investment does not. That is, Algebraically,
Net Investment = Gross Investment – Depreciation