Question

Physical capital is​ ______. Financial capital is​ ______.

A.inventories of raw materials and semifinished​ goods;
the​ tools, instruments,​ machines, buildings, and other items that have been produced in the past and that are used today to produce goods and services
B.the funds that firms use to buy physical​ capital;
the stocks that can be purchased on the stock market and the bonds that can be purchased on the bond market
C.the​ tools, instruments,​ machines, buildings, and other items that have been produced in the past and that are used today to produce goods and​ services; the funds that firms use to buy physical capital
D.the stocks that can be purchased on the stock market and the bonds that can be purchased on the bond​ market;
money in the bank

Answer 1

Physical capital is the collection of physical assets like machinery and buildings used in production, while financial capital refers to the funds and financial assets used to purchase physical capital. Both types of capital are crucial for enhancing productivity and future output. The correct option is A.

Step-by-step explanation:

Physical capital is the tools, instruments, machines, buildings, and other items that have been produced in the past and that are used today to produce goods and services. Financial capital is the funds that firms use to buy physical capital, including money and other 'paper' assets such as stocks and bonds that represent claims on future payments. Unlike physical capital, financial capital does not directly contribute to production, but it enables the acquisition of physical capital.

Physical capital per person refers to the quantity and quality of machinery and equipment available to help an individual produce a good or service, which can enhance productivity either by increasing the number of available tools or by improving their technology and efficiency. Investment in both physical and human capital pays off in higher productivity in the future, leading to increased output.