Question: The ratio of capital spending to GDP rose sharply during the latter 1970s, even though bond yields rose sharply during that period. It then increased even further during the early 1980s, when bond rates peaked. When bond rates declined during the latter half of the 1980s, the ratio of capital spending also fell. Explain how each of the following factors contributed to these changes.

(A) The nominal rate of interest.

(B) The real rate of interest.

(C) Changes in depreciation schedules.

(D) The rate of capacity utilization.

(E) The relative price of capital goods.