The Tradeoff Between Current Consumption and the Production of Capital

question 397

Multiple Choice

The tradeoff between current consumption and the production of capital goods also reflects a tradeoff between

• A) the future production of capital goods and future consumption of goods.
• B) economic growth and technological change.
• C) satisfying today the needs of the poor and the wants of the wealthy.
• D) current consumption and future consumption.

---

Definitions:

Capital Expenditures

Capital employed by a business for the purchase or improvement of tangible assets like land, factories, or machinery.

Double-Declining-Balance

A method of accelerated depreciation in which an asset's book value is reduced by twice the rate of straight-line depreciation.

Straight-Line Rate

The Straight-Line Rate refers to a method of calculating depreciation or amortization by evenly allocating the cost of an asset minus its salvage value over its useful life.

Depreciation Method

A systematic approach to allocating the cost of a tangible asset over its useful life.