In Chapter 11,depreciation is assumed to be
A)a fixed proportion of real GDP.
B)a fixed proportion of the capital stock.
C)a fixed absolute amount.
D)zero.
E)a fixed proportion of the capital-labor ratio.

Question

Quizplus · Accepted Answer

Depreciation is defined as the decline in the value of an asset over time due to wear and tear, obsolescence, or any other factor that reduces its usefulness. In macroeconomics, depreciation refers to the decline in the value of the capital stock, which is the total amount of physical assets such as buildings, machines, and infrastructure that are used in production. Depreciation is assumed to be a fixed proportion of the capital stock because as the capital stock grows over time, more assets become older and less useful, resulting in a higher level of depreciation. Therefore, choice B is the best answer.

In Chapter 11,depreciation Is Assumed to Be