Ch. 11 - Input Demand: Capital Market and the Investment Decision

Human Capital

A 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.

Common Stock

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

Social Capital (Infrastructure)

Capital the provides services to the public. Most social capital takes the form of public works and public services.

Bond

A contract between a borrower and a lender, in which the borrowers agrees to pay the loan at some time in the future. Some bonds also make regular, constant payments once or twice a year.

Capital Stock

For a single firm, the current market value of the firm's plant, equipment, inventories and intangible assets.

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.

Tangible (Physical) Capital

Material things used as inputs in the production of future goods and services. The major categories of physical capital are nonresidential structures , durable equipment, residential structures and inventories.

Investment

New Capital additions to a firms's capital stock. Although capital is measured at a given point in time (a stock), investment is measured over a period of time (a flow) of investment increases the capital stock.

Intangible Capital

Nonmaterial things that contribute to the output of future goods and services.

Dividend

Payment made to shareholders of a corporation

Expected Rate of Return

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

Depreciation

The decline in an assets economic value over time

Capital Market

The market in which households supply their savings to firms that demanded funds to buy capital goods.

Financial Capital Market

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

Interest

The payments made of the use of money.

Capital

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