If the real interest rate is 4 percent,the marginal product of capital is 2%,the depreciation rate is 10%,the tax rate is 0 percent,and capital gain is 1 percent,the user cost of capital is 13 percent.

Question

Quizplus · Accepted Answer

The formula for user cost of capital is:

User Cost of Capital = (Real Interest Rate + Depreciation Rate - Capital Gain) / (1 - Marginal Product of Capital)

Using the given values, we get:

User Cost of Capital = (0.04 + 0.1 - 0.01) / (1 - 0.02) = 0.13

Therefore, the statement "the user cost of capital is 13 percent" is true.

If the Real Interest Rate Is 4 Percent,the Marginal Product