Commerce

Kautilya 2025
Economics DPP: 3

Some Basic Concepts of Macroeconomics

Q1 Gross investment can be equal to net Q4 Depreciation of fixed capital assets refers to:
investment. (A) Normal wear and tear
(B) Foreseen obsolescence
Q2 Consumption of Fixed Capital (or Depreciation)
(C) Normal wear & tear & foreseen
has nothing to do with the efflux of time.
obsolescence
Q3 Which of the following flowchart correctly (D) Unforeseen obsolescence
establishes the treatment of 'Depreciation'?
Q5 Unforeseen obsolescence of fixed capital
(A)
assets during production is:
(A) Consumption of Fixed Capital
(B) Capital Loss
(C) Income Loss
(D) None of the above

(B) Q6 Addition to the capital stock of an economy is

termed as:
(A) Investment
(B) Capital Loss
(C) Consumption of Fixed Capital
(D) All of these
(C)
Q7 Final Goods are used by:
(A) Households
(B) Firms
(C) Government
(D) All of the above
(D)
Q8 Which of the following leads to unexpected
obsolescence?
(A) Natural Calamities
(B) Change in Demand
(C) Change in Technology
(D) Both (a) and (c)

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Answer Key
Q1 true Q5 (B)

Q2 false Q6 (A)

Q3 (A) Q7 (D)

Q4 (C) Q8 (A)

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Hints & Solutions

Q1 Text Solution: obsolescence. Depreciation is additionally
Gross investment is the total addition to an called consumption of fixed capital. Loss of
economy's capital stock over a given time fixed assets occur because of normal wear,
period, whereas net investment is the actual normal rate of accidental damages and
addition to an economy's capital stock. expected obsolescence.
The only distinction between gross and net Q5 Text Solution:
investment is the depreciation of capital Unforeseen obsolescence of fixed capital
assets over time. assets during production is capital loss.
Depreciation is included in gross investment, Unforeseen obsolescence which might occur
but it is not included in net investment. because of natural calamity isn't considered
As a result, deducting depreciation from while computing depreciation and hence, it
gross investment yields net investment. causes capital loss.
true if there is no depreciation in the
Q6 Text Solution:
economy then gross investment=net
Addition to the capital stock of an economy is
investment
termed as investment. Investment can be
Q2 Text Solution: alluded to as a course of capital formation, or
Consumption of fixed capital ( or Depreciation ) an interaction that expands the supply of
depends on the efflux of time . As the time capital during the year.
increase the value of fixed assets decreases (
Q7 Text Solution:
Except land ) or depreciation increases
In basic words, final goods are commodities
Q3 Text Solution: that are fabricated by an organization for
Depreciation means the loss of the value of ensuing consumption by the consumer. These
fixed assets mainly due to wear and tear and products fulfill the consumer needs or
expected obsolescence.The Formula is - wants. Final goods comprise of : Goods that
Gross - Depreciation = Net are bought by the households implied for final
or, consumption.
Net + Depreciation = Gross.
Q8 Text Solution:
Q4 Text Solution: Unexpected obsolescence happens because
Deterioration of fixed capital assets alludes of natural calamities like earthquakes, floods,
to normal wear and tear and foreseen etc. or because of robbery, accidents, etc.

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