Final answer:
Depreciation represents the reduction in the value of an asset over time. An increase in the supply of money would likely lead to a decline in interest rates. A deficit is the annual shortfall between government revenues and expenditures.
Step-by-step explanation:
A reduction in the value of an asset with the passage of time is best represented by the concept of depreciation. Depreciation is an accounting method of allocating the cost of a tangible or physical asset over its useful life. As time passes, the asset becomes less valuable due to factors like wear and tear, obsolescence, or changes in technology, which is reflected in financial statements through depreciation.
Regarding changes in the financial market that lead to a decline in interest rates, a rise in the supply of money, relative to the demand for it, typically results in lower interest rates. This is because more capital is available for borrowing, and lenders must lower rates to attract borrowers.
Understanding how deficits impact the financial balance, a deficit is defined as the annual budget shortfall between revenues and expenditures (Option b). The governmental deficit represents the amount by which spending exceeds income within a given period, leading to borrowing and potential long-term debt.