APPRECIATION

The term appreciation has several specific uses in economics but in general it refers to an increase in value over time. At the level of macroeconomics (or the study of entire economic systems), appreciation is often used to describe the rise of the value of one currency vis-à-vis (in relation to) another. For example, when U.S. travelers can buy more foreign goods with their dollar in one year than they could in an earlier year, we say that the dollar has "appreciated" in comparison to the foreign currency. It is also possible for the U.S. dollar to appreciate vis-à-vis one currency but depreciate relative to another. For example, between January 1979 and January 1981 the U.S. dollar appreciated in value relative to the German mark (U.S. travelers could buy more marks with their dollar than earlier); during the same period the U.S. dollar depreciated relative to the British pound (the dollar bought fewer pounds). (Note that the terms revaluation and devaluation are used instead of appreciation and depreciation when referring to changes in a currency's value brought about by the action of that currency's government. For example, if country A's currency has appreciated relative to other global currencies, the country's government may "devalue" its currency so its goods will be more attractively priced in the international marketplace.)

Appreciation is also used to describe the increase in market value of an asset such as a home or a stock over time. For example, buying a home is considered an excellent investment because individual homes often appreciate in value when the property values in their neighborhood rise, even if the individual homeowner made no improvements to his or her own home. Similarly, the value of the stocks of many large corporations appreciated in value since the bull market of 1982 began. For example, investors who bought $1000 in the stock of computer storage firm EMC Corp. in 1991 (but no additional stock) saw their $1000 appreciate in value to more than $18,000 five years later.

See also: Currency, Depreciation

ap·pre·ci·a·tion / əˌprēshēˈāshən/ • n. 1. the recognition and enjoyment of the good qualities of someone or something: I smiled in appreciation. ∎  gratitude for something: they would be the first to show their appreciation. ∎  a piece of writing in which the qualities of a person or the person's work are discussed and assessed. ∎  sensitive understanding of the aesthetic value of something: courses in music appreciation.2. a full understanding of a situation: they have an appreciation of the needs of users.3. increase in monetary value: the appreciation of the pound against the dollar.

APPRECIATION

The fair and reasonable estimation of the value of an item. The increase in the financial worth of an asset as compared to its value at a particular earlier date as a result of inflation or greater market demand.