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The Bureau of Economic Analysis reported that the U.S. capital stock was $23.0 trillion at the end of 1999, $23.8 trillion at the end of 2000, and $24.4 trillion at the end of 2001. Depreciation in 2000 was $1.0 trillion, and gross investment during 2001 was $1.6 trillion (all in 2005 dollars). Calculate U.S. net investment and depreciation during 2001.

a) Net investment: $0.6 trillion; Depreciation: $1.0 trillion
b) Net investment: $1.6 trillion; Depreciation: $0.6 trillion
c) Net investment: $0.6 trillion; Depreciation: $0.6 trillion
d) Net investment: $1.0 trillion; Depreciation: $1.6 trillion

Answer :

Final answer:

To calculate U.S. net investment and depreciation for 2001, the net investment is the difference in capital stock, which is $0.6 trillion, and depreciation is derived from the difference between the gross investment and net investment, resulting in $1.0 trillion. Hence, the correct option is a) Net investment: $0.6 trillion; Depreciation: $1.0 trillion

Explanation:

To calculate U.S. net investment and depreciation during 2001, we use the values provided by the Bureau of Economic Analysis. The capital stock at the end of 2000 was $23.8 trillion and at the end of 2001 was $24.4 trillion. Knowing that the gross investment during 2001 was $1.6 trillion, we can determine the net investment and depreciation for that year.

Net investment is calculated as the difference in the capital stock plus depreciation. Therefore, the net investment during 2001 would be the change in capital stock ($24.4 trillion - $23.8 trillion = $0.6 trillion) plus depreciation. As we are not given the depreciation figure for 2001, we employ the provided gross investment and the calculated net investment to derive depreciation, which would be the difference between the gross investment and net investment ($1.6 trillion - $0.6 trillion = $1.0 trillion).

Therefore, the correct answer is: a) Net investment: $0.6 trillion; Depreciation: $1.0 trillion.

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