ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Capital as a factor of production receives Interest as a reward. When a company takes a loan out, it is expected to pay back the total with some extra amount.

Detailed explanation-2: -The four factors of production are land, physical capital, human capital, and entrepreneurship. The reward for land is rent, for capital is interest, for labor or human capital is wages, and for entrepreneurship is profit.

Detailed explanation-3: -Interest is the reward for capital.

Detailed explanation-4: -Capital owners receive a reward of interest as producers increase their capital stock by taking out loans and borrowing from the private sector. Therefore, interest represents the opportunity cost of borrowing for firms and the reward for owners of each unit of capital.

Detailed explanation-5: -The reward received by land a factor of production is rent. Interests, profits and wages are rewards received by organisations, capital and labour respectively.