Suppose that a machine costs $10,000 in constant dollars and the real
Suppose that a machine costs $10,000 in constant dollars and the real rate of interest is 12 percent.
If the machine is expected to increase in price by 2 percent and the rate of depreciation is 5 percent, then the user cost of capital for that machine over one year is equal to ________. A) $150
B) $1,500
C) $10,000
D) $102,500
ANSWER
B
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