Business Cycles and Asset Markets

CFA Level I Economics
#1

In question 7 of the practice questions, it mentions companies will most likely reduce stocks of physical capital by not maintaining equipment and letting it age. I found information about this in an alternate source, but am struggling to find it in the prescribed text. It is discussed multiple times that equipment won’t be used to full capacity, but never mentions anything about neglecting maintenance.

This is the second practice question I have seen in this set which is based on information not discussed in the text. Have I missed a supplementary reading or something?

#2

If the company doesn’t use a equipment at full capacity they are more likely to not maintain their current equipment. I found it by logic, I’m not really sure it’s written in the book explicitly.

Another way to answer questions is to find wrong answers and isolate the good answer.