Ch17-8e_micro CapitalMkts

Ch17-8e_micro CapitalMkts - Capital Markets Capital markets...

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Capital Markets Capital markets are the channels through which firms obtain financial resources to buy physical factors of production that economists call capital. The available financial resources come from savings. The real interest rate is the return on capital and is the “price” determined in the capital market.
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Capital Markets Figure 17.8 shows that the real interest rate fluctuates but it has shown no trend.
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Capital Markets The Demand for Capital A firm’s demand for financial capital stems from its demand for physical capital and amount that a firm plans to borrow in a given time period is determined by its planned investment —its planned purchases of new capital. The factors that determine investment and borrowing plans are the Marginal revenue product of capital Interest rate
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Marginal Revenue Product of Capital The marginal revenue product of capital is the change in total revenue that results from employing one more unit of capital. The marginal revenue product of capital diminishes as
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This note was uploaded on 07/02/2011 for the course ECON 221 taught by Professor Gordanier during the Spring '08 term at South Carolina.

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Ch17-8e_micro CapitalMkts - Capital Markets Capital markets...

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