The model predicts that if there is a technology, A, shock, the real rental price of capital will:
A)be relatively high during an economic expansion or a recession.
B)be relatively low during an economic expansion or a recession.
C)be relatively high during an economic expansion and relatively low during a recession.
D)be relatively low during an economic expansion and relatively high during a recession.

Question

Quizplus · Accepted Answer

A technology shock typically increases productivity, leading to economic expansion and higher demand for capital, thus raising its real rental price. During a recession, the opposite occurs, and the demand for capital decreases, lowering its real rental price.

The Model Predicts That If There Is a Technology, A