Question

1. If an economy has positive gross investment can we conclude that the economy is adding to the capital stock?

Answer 1

No, if an economy has positive gross investment by this we cannot conclude that the economy is adding to the capital stock because it might be possible that due to depreciation the economy's capital stock has declined as it is the net investment that matters for the capital stock and not the gross investment. On the other hand, if the gross investment is greater than the depreciation then we can conclude that the economy is adding to the capital stock so it is important to take into account the appreciation.