Macro Module 7 Market for capital practice exam questions
Question 7.1: Market for capital
● The price level is 1.75; the supply of capital Ks is now 11.84, and the real rental price R/P is now 8.22%.
● The capital utilization rate (κ) = 100%, the depreciation rate of capital δ = zero, and capital × the marginal product of capital = 1.
Both capital and the capital utilization rate are fixed in the short run.
What happens in the short run as the market for capital clears?
Answer 7.1: The market clears by the real rental price changing to 1 / the supply of capital = 1/11.84 = 8.45%