We can think about the interest rate as the "price" of capital because

Question

Quizplus · Accepted Answer

The interest rate is the "price" of financial capital because firms use financial capital (such as loans) to purchase physical capital (such as machinery). The interest rate represents the cost of borrowing money to purchase this physical capital. Thus, D is the best choice. A, B, C, and E are incorrect because they do not fully capture the relationship between the interest rate and the "price" of capital.

We Can Think About the Interest Rate as the "Price