A reduction in which of the following variables will cause a reduction in the user cost of capital?

Question

Quizplus · Accepted Answer

The user cost of capital (r) is equal to the sum of the interest rate (i) and the economic depreciation rate (δ). Therefore, a reduction in δ would lead to a reduction in r. Changes in Πt and Πet, which represent profits and expected profits, respectively, do not directly affect the user cost of capital.

A Reduction in Which of the Following Variables Will Cause