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22 August, 17:35

A small economy starts the year with $3,500,000 in capital. During the course of the year, gross investment is $300,000 and depreciation is $150,000. How big is the economy's stock of capital at the end of the year?

a. $3,650,000b. $3,800,000c. $3,950,000d. $3,850,000

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  1. 22 August, 17:36
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    correct option is a. $3,650,000

    Explanation:

    given data

    Beginning capital = $3,500,000

    Gross investment = $300,000

    Depreciation = $150,000

    solution

    we get here first Net investment that is express as

    Net investment = Gross investment - Depreciation ... 1

    put here value and we get

    Net investment = $300,000 - $150,000

    Net investment = $150,000

    and

    Economy stock of capital at the end of the year will be as

    Economy stock of capital = Beginning capital + Net investment

    Economy stock of capital = $3,500,000 + $150,000

    Economy stock of capital = $3,650,000

    so correct option is a. $3,650,000
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