If the real interest rate is 4 percent, the marginal product of capital is 2 percent, the depreciation rate is 10 percent, the tax rate is 0 percent, and capital gain is 1 percent, what is the user cost of capital?

Question

Quizplus · Accepted Answer

The user cost of capital is calculated as the real interest rate plus the depreciation rate minus the capital gain. Therefore, it is 4% (real interest rate) + 10% (depreciation rate) - 1% (capital gain) = 13%.

If the Real Interest Rate Is 4 Percent, the Marginal