If the Price Index for Capital Goods Is the Same

question 95

Multiple Choice

If the price index for capital goods is the same as the price index for other goods, an index of the real cost of capital for investment, in the absence of taxes, may be summarized as the:

• A) nominal interest rate plus the depreciation rate.
• B) real interest rate plus the depreciation rate.
• C) purchase price of a capital good multiplied by the sum of the nominal interest rate plus the depreciation rate.
• D) purchase price of a capital good multiplied by the sum of the real interest rate plus the depreciation rate.

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Definitions:

Resources

Assets, materials, or substances that are available and valuable in producing goods or providing services.

Externalities

Costs or benefits that affect a party who did not choose to incur that cost or benefit, caused by an economic transaction.

Health Insurance

A form of insurance that covers medical expenses that arise due to illness or injury, typically providing coverage for a variety of healthcare services.

Quantity

The amount or number of a material or immaterial good considered as a unit or an aggregate.