Aggregate Depreciation Expense: Understanding its Impact and Importance

The Impact of Aggregate Depreciation Expense

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Question

Aggregate depreciation expense tends to

Answers

A. decrease during recessions.

B. always decrease.

C. never decrease.

D. decrease during the peak of the business cycle.

E. decrease during the economic recoveries.

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Explanations

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A. B. C. D. E.

Because depreciation expense is an estimate of fixed cost expense related to total fixed assets, it tends never to decrease because total fixed assets for a large number of firms (such as those in the S&P 400) tend never to decrease. The relevant question is by how much depreciation expense increases.

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