An increase in the supply of capital will:
A) increase the real rental price of capital.
B) decrease the real rental price of capital.
C) increase the productivity of capital.
D) decrease the real interest rate.

Question

Quizplus · Accepted Answer

An increase in the supply of capital would lead to a decrease in the real rental price of capital because there would be a greater supply of capital available for firms to use, lowering the price they would have to pay to rent it. This is based on the law of supply and demand.

An Increase in the Supply of Capital Will