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Net investment refers to gross investment minus depreciation and shows the real
increase in capital stock.
4.5.4 Depreciation and Replacement Investment
Depreciation is the loss in value of capital goods due to wear and tear.
Replacement investment refers to spending made to replace worn-out capital goods. It
maintains production capacity but does not increase it.
4.5.5 Importance of Investment
Investment is important because it increases productive capacity, creates employment,
supports economic growth, and improves technology.
4.6 Government Spending (G)
Government spending refers to spending by the government on goods and services.
Examples include salaries of public employees, roads, bridges, schools, hospitals, and
public services.
4.6.1 Transfer Payments
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