Hi Sherriaf,
I took BEC on Tuesday (2/23) so I may be able to help you. Depreciation tax shield is a relative cost (albeit indirectly) but depreciation expense is not. The tax shield is the actual $$ that you will be saving when paying taxes, but depreciation expense as a whole is just something you report on your books..make sense?
The disposal price of the old equipment is generally not a relative cost but it can be in certain circumstances. For example, it wouldn't be a relative cost if you were deciding between buying equipment A or equipment B, since either way you would be getting the same amount of money from the old equipment and it would not affect your decision is any way. However, it could be a relative cost if you were deciding whether to keep the old equipment or to buy new equipment. In that case, the money you got from the old equipment would have an impact on your decision on whether to buy the new equipment or not. The key point in determining whether something is a relative cost is whether it is going to have any impact on your decision.
For your economics question- if the government doesn't care about inflation, I would guess that they would increase the money supply because even though there will be inflation, an increased money supply will make GDP grow.
More money in the money supply means there's more money out there for people to spend so the Consumer component of GDP increases, which means prices of things will go up due to inflation.
Hope this helps. It's possible that I could be wrong on a couple of points so feel free to correct me.
BEC-92(02/2010) REG-90(04/2010) AUD-86(05/2010) FAR-??(08/2010)
