Q. Consider the following statements:
1.Depreciation refers to the sudden destruction of capital goods due to accidents or calamities.
2.Net investment is calculated by subtracting depreciation from gross investment.
3.Capital goods are consumed immediately, like food items and clothing.
Which of the statements given above is/are correct?
Quarterly-SFG-Jan-to-March
Red Book

[A] 1 and 2 only

[B] 2 only

[C] 2 and 3 only

[D] 1, 2 and 3

Answer: B
Notes:

Explanation:

  • Depreciation refers to the gradual wear and tear of capital goods over their expected life, not sudden destruction (which is considered separately).
  • Net Investment = Gross Investment – Depreciation.
  • Capital goods are durable goods used over multiple production cycles; they are not consumed immediately like food or clothing.

Source- 12th NCERT: Economics: Macroeconomics

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