The price of a unit of capital is 2 comma 000. The rate of depreciation is: 20% per year. The annual real rate of interest is: 7% What is the user cost of capital?

Unit price = 2,000

User cost of capital is this

c = r + d

c = (7% of 2000) + (20% of 2000)

c = 140 + 400 = 540

Explanation:

The real rate of interest, r = user cost of capital, c - rate of depreciation, d

there was no passage listed but using the process of elimination i'd say it was d. the high economy would do the opposite. i don't see how low prices would affect it. high unemployment is possible but i feel d is the better answer.