Depreciation is
A) the value of worn-out equipment, machinery, and buildings.
B) the value of the decrease in business inventory stocks.
C) the value of the addition to the capital stock.
D) the decline in the value of the stock market, net of dividends.
Answer: A
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If the Federal Open Market Committee decides to expand the money supply, then it will
A. raise the discount rate to member banks. B. issue directions to purchase government securities, thus putting more reserves in member banks. C. issue directions to sell government securities, thus taking reserves from member banks. D. order new Federal Reserve notes delivered to member banks.
What can we conclude if depreciation (consumption of fixed capital) exceeds gross domestic investment?
A. Net investment is negative. B. The economy is importing more than it exports. C. The economy's production capacity is expanding. D. Nominal GDP is rising but real GDP is declining.