ECON

Capital goods, define

Goods produced by the economic system that are used to produce other goods and services in the future.

Major categories of physical/tangible capital

(1) nonresidential structures
(2) durable equipment
(3) residential structures
(4) inventories

Social capital

capital that provides services to the public

Intangible capital

includes human capital and goodwill

the most important dimension of capital

time; its value is only as great as the value of the services it will render over time

the value of capital is only as great as what?

the value of the services it will render over time

most common measures of a firm's capital stock

current market value of its:
(1) plant
(2) equipment
(3) inventories
(4) intangible assets

investment, define

creation of new capital

depreciation, define

decline in an asset's economic value

capital income, define

income earned on savings that have been put to use through financial capital markets

capital income, forms

(1) interest
(2) profits

the capital market exists to do what?

direct savings into profitable investment projects

Expected rate of return, factors

(1) price of the investment
(2) expected length of time the project provides additional cost savings or revenue
(3) expected amount of revenue attributable each year to the project

A perfectly competitive, profit-maximizing firm will keep investing in new capital up until what point?

The point at which expected rate of return is equal to the interest rate.