gross investment

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Spending on creating new capital goods, before making any allowance for capital consumption. Gross investment consists of gross fixed investment, plus net investment in stocks and work in progress. Gross investment is distinguished from net investment, which measures the change in the capital stock after allowing for capital consumption. Gross investment is in principle based on observable market transactions; by contrast, capital consumption is based on calculations about the rate at which capital goods wear out or become obsolete. These calculations are not based on market transactions: thus they, and estimates of net investment based on them, are less reliable than measures of gross investment.

Subjects: Economics.

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