Question

Multiple Choice experiencing inflation because disposable income exceeds personal income. experiencing expanding production capacity because net private domestic investment is positive. experiencing declining production capacity because net investment is negative. in a depression because personal income exceeds disposable income.

Answer 1

Answer: Experiencing declining production capacity because net investment is negative

Explanation:

Investment in a country includes capital Expenditure such as buildings, roads, inventory and etcetera which contribute to the production capacity of the Nation.

Net Investment is calculated by subtracting Depreciation from the Gross Private Domestic Investment. When Net Investment is negative, it means that the Production capacity of the nation is weakened and declining because the Investment available is not able to produce as much.

In the country described, the Net Investment is,

= Gross Private Domestic Investment - Consumption of Fixed Capital (Depreciation)

= 46 - 52

= -$6 billion

The Net Investment for this Economy is negative showing a declining production capacity.