ECONOMICS
HUMAN CAPITAL
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A restaurant starts opening earlier so it can serve lunch.
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A company pays its employees’ graduate school tuition.
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A farmer buys a new tractor to replace his old one.
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A government starts providing kindergarten.
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Detailed explanation-1: -Examples include plants, office buildings, manufacturing machinery, and vehicles. Spending to purchase these assets is known as capital expenditures (CapEx). Capital goods also consist of smaller tools and supplies that companies use.
Detailed explanation-2: -Capital goods are physical assets that a company uses in the production process to manufacture products and services that consumers will later use. Capital goods include buildings, machinery, equipment, vehicles, and tools. Capital goods are not finished goods, instead, they are used to make finished goods.
Detailed explanation-3: -Importance of Capital Goods in the Economy If a business is unable to produce goods due to the lack of equipment, then it cannot compete in the market. Capital goods play a vital role in increasing the production of goods in the long term, or in other words, it increases the production capacity of goods and services.
Detailed explanation-4: -Business investment can affect the economy’s short-term and long-term growth. In the short term, an increase in business investment directly increases the current level of gross domestic product (GDP), because physical capital is itself produced and sold.