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DEPRECIATION: A more or less permanent decrease in value or price. "More or less permanent" doesn't include temporary, short-term drops in price that are common in many markets. It's only those price declines that reflect a reduction in consumer satisfaction. While all sorts of stuff can depreciate in value, some of the more common ones are capital, real estate, corporate stock, and money. The depreciation of capital results from the rigors of production and affects our economy's ability to produce stuff. A sizable portion of our annual investment is thus needed to replace depreciated capital. The depreciation of a nation's money is seen as an increase in the exchange rate. This process is described in detail in the entry on the J curve.
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RISK The quantitative probability of different future outcomes occurring. The assignment of probabilities can be subjective (based on a "feeling") or objective (based on historical data). Risk is related to the concept of uncertainty, which is simply not knowing what the future holds. People have three alternative preferences when confronting risk -- risk aversion, risk neutrality, and risk loving. Risk aversion is key to the provision of insurance.
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Francis Bacon (1561-1626), a champion of the scientific method, died when he caught a severe cold while attempting to preserve a chicken by filling it with snow.
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"Don't be afraid if things seem difficult in the beginning. That's only the initial impression. The important thing is not to retreat; you have to master yourself." -- Olga Korbut, Gymnast
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AS
Aggregate Supply
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