At the beginning of a year, the capital stock of an economy is Rs 5,000 crore. During the year, gross investment is Rs 600 crore and depreciation is Rs 200 crore. What is the capital stock at the end of the year?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Rs 5,400 crore
Given:
Capital stock at the start = Rs 5,000 crore
Gross investment = Rs 600 crore
Depreciation = Rs 200 crore
Only net investment adds to the capital stock. Depreciation only replaces worn-out capital.
Net investment = 600 − 200 = 400
Capital stock at the end = 5,000 + 400 = Rs 5,400 crore
Rs 5,600 crore adds gross investment and ignores the wear and tear.
NCERT (2026-27): “2.1 Some Basic Concepts of Macroeconomics … This deletion, which is made from the value of gross investment in order to accommodate regular wear and tear of capital, is called depreciation. So new addition to capital stock in an economy is measured by net investment or new capital formation, which is expressed as |