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Select Any One Of the Following Options: A small economy starts the year with $1 million in capital. During the course of the year, gross investment is $150,000 and depreciation is $50,000. What is the economy?s capital stock at the end of the year?$0.85 millions$1 million$1.15 millions$1.1 millions

Question

Select Any One Of the Following Options: A small economy starts the year with 1millionincapital.Duringthecourseoftheyear,grossinvestmentis1 million in capital. During the course of the year, gross investment is 150,000 and depreciation is 50,000.Whatistheeconomy?scapitalstockattheendoftheyear?50,000. What is the economy?s capital stock at the end of the year?0.85 millions1million1 million1.15 millions$1.1 millions

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Solution

The economy's capital stock at the end of the year can be calculated by adding the gross investment to the starting capital and then subtracting the depreciation.

Here's how you can do it:

  1. Start with the initial capital, which is $1 million.
  2. Add the gross investment, which is 150,000.Thisgivesyouatotalof150,000. This gives you a total of 1.15 million.
  3. Subtract the depreciation, which is $50,000.

So, 1,000,000(initialcapital)+1,000,000 (initial capital) + 150,000 (gross investment) - 50,000(depreciation)=50,000 (depreciation) = 1,100,000.

Therefore, the economy's capital stock at the end of the year is $1.1 million.

This problem has been solved

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