Depreciation is also known as:
Options
ACapital loss
BConsumption of fixed capital
CInvestment
DSubsidy
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Determination of National IncomePYQ - July 2021 (Inter)Question 118 of 20
All Questions Correct Answer
✅ Option b — Consumption of fixed capital
All Options:
- ACapital loss
- BConsumption of fixed capital
- CInvestment
- DSubsidy
Detailed Solution & Explanation
To understand the concept of depreciation, we need to consider the economic principle of asset valuation.
• Depreciation refers to the decrease in value of a fixed asset over its useful life, due to wear and tear, obsolescence, or other factors.
• This concept is closely related to the idea of consumption of fixed capital, which is a key component of national income accounting and economic theory.
• The correct term for depreciation, in this context, is consumption of fixed capital, as it represents the using up of fixed assets in the production process.
• Options like capital loss are incorrect because they refer to a one-time decrease in asset value, rather than a gradual decrease over time.
• Investment is also incorrect, as it refers to the acquisition of new assets, rather than the decrease in value of existing ones.
• Therefore, the correct answer is based on the economic principle of consumption of fixed capital, which accurately reflects the concept of depreciation.
About This Chapter: National Income
Paper
Paper 4: Business Economics
Weightage
15%
Key Topics
Aggregates, Measurement, Keynesian Theory
A crucial chapter covering national income aggregates like GDP, GNP, NDP, NNP, and the methods of measuring national income (Income, Expenditure, and Output methods). It also introduces Keynesian Theory including the concepts of Aggregate Demand, Consumption Function, and the Multiplier.
View Official ICAI SyllabusExam Strategy Tip
Practice numerical questions on GDP/GNP calculations and the Multiplier. These are guaranteed marks in every exam. Also understand the circular flow of income clearly.
Key Concepts to Understand
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