Chapter 11: Capital Market and Investment

capital

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

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 capital

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

intangible capital

nonmaterial things contributing to the output of future goods and services

financial capital market

part of the capital market where savers and investors interact through intermediaries

dividend

payment made to shareholders of a corporation

interest

payments made for the use of money

depreciation

the decline in an asset's economic value over time

the capital market

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

capital stock

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

flow

________ measures over a period of time

stock

___________ measures a point in time

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

expected rate of return

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

social capital/infrastructure

capital that provides services to the public ex. roads

bond

contract between a borrower and a lender, and the borrower agrees to pay the loan at sometime in the future