Chapter 40, Problem 3MCQ

To determine

The term for the reduction in the value of an asset due to wear and tear.

Answer to Problem 3MCQ

Option a is correct.

Explanation of Solution

Explanation for the correct option:

a.

Normal wear and tear of the capital assets, usually machinery is known as depreciation. Therefore, option a is correct.

Explanation for incorrect options:

b.

Negative investment refers to an unfavorable investment that earns no returns.

c.

Economic decline refers to a recession in economic activity.

d.

Disinvestment refers to the amount that is withdrawn from the investment done earlier.

e.

Net investment refers to the amount of investment left after deducting depreciation amount from capital assets.

Economics Concept Introduction

Depreciation: Depreciation is the reduction in the value of assets that are calculated percentage-wise over a financial period.