Macroeconomics operates with a specific list of important terms. The key place in it is capital. However, this in itself is an extremely broad concept. Let's decide which objects are related to physical capital. Let's start with a general theory.
Capital is …
Capital is all material assets: equipment, buildings, other structures, tools, goods, infrastructure and so on. If you look from the point of view of classical political economy, it refers to one of the three factors of production (the other two are labor and land).
The modern economy defines capital as any value that can bring profit. This equipment, and stock, and the building, and the contribution to the bank. As well as human skills and abilities, experience, education, which are able to bring income to their owner. Here, however, it is already about human capital.
The concept can also be considered as a stream (investments that multiply existing benefits) and as a stock (goods accumulated over some period of entrepreneurial activity).
Physical and monetary capital
Consider two subtitled varieties:
- Physical - means of production, the use of which brings a certain income. Physical capital includes structures and buildings, equipment and vehicles, land, goods and machinery.
- Money is finance. They will just be aimed at acquiring physical capital. This monetary category alone does not generate income.
What does not relate to fixed physical capital? Funds procured for its acquisition.
