Micro Chapter 11: Input Demand: The Capital Market and the Investment Decision

Capital Stock

for a single firm, the current market value of the firms plant, equipment, inventories, and intangible assets

Human Capital

form of intangible capital that includes the skills and other knowledge that workers have or acquire through education and training and that yields valuable services to a firm over time

Capital Income

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

Interest Rate

interest payments expressed as a percentage of the loan

Capital Market

market in which households supply their savings to firms that demand funds to buy capital goods

Physical Capital

material things used as inputs in the production of future goods and services

Intangible Capital

nonmaterial things that contribute to the output of future goods

Financial Capital Market

part of the capital market in which savers and investors interact through intermediaries

Dividend

payment made to shareholders of a corporations

Expected Rate of Return

the annual rate of return that a firm expects to obtain through a capital investment

Capital

those goods produced by the economical system that are used as inputs to produce other goods and services in the future

Depreciation

decline in an asset's economic value over time

Interest

Payments made for the use of money

Bond

a contract between a borrower and a lender, in which the borrower agrees to pay the loan at some time in the future

Investment

a flow that increases the stock of capital

Common Stock

a share of stock is an ownership claim on a firm, entitling its owner to a profit share

Social Capital

capital that provides services to the public