Q:

What is gross investment?

A:

Quick Answer

According to London South East, gross investment refers to the purchase of new assets as well as replacing old assets. Gross investment does not include any depreciation that may be accrued over the lifetime of an asset.

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Full Answer

When firms are looking to invest, they are either financing new equipment for the purposes of expansion or replacing old equipment to enhance productivity. On the other hand, net investment only includes equipment or assets that are newly purchased. The difference between gross investment and net investment is known as replacement investment. Because gross investment includes replacing existing assets, it is not used as a reliable equation for calculating economic growth.

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