CAPITALCLASS - 1 CAPITAL & Interest 1 In the...

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Unformatted text preview: 1 CAPITAL & Interest 1 In the News? Warren Buffett, the second-wealthiest man in 2 America, wants to pay more taxes. "People at the high end -- people like myself -- should be paying a lot more in taxes. Course Issues LAST CLASS Monday May 2 Investment Game ends at market close on Friday 4/29 Results and Prizes Monday 5/2 in class Review Guides, Essential Questions, Chat room, study group, Q&A all coming Course evals survey etc coming 3 Course evals, survey, etc coming Final exam conflicts see me 4/18 or 4/21 and online form 150 mult choice drawn -most important, not hw exactly (h1) Essential questions, review guide, assignments notes , big questions 2 Whats Capital? Roundabout production Produced goods used to produce goods= roundabout production Requires foregoing current consumption i.e. Saving Tangible and intangible capital Structures, equipment, inventories 4 Software, patents (intellectual property), brands and good will Human capital relation Capital Markets rental cost of capital Financial Capital - claims Why Does Capital Matter? Increases MPL productivity and GDP Diminishing Returns (Marginal Productivity) of Capital As K Y/ K basis of neo-classical growth theory steady state And returns to capital = MPk which falls 5 But technological improvements Substitutes for and Augments Labor Firms choose K and L so that MPk/Pk=MPL/PL = MPk/MPL=Pk/PL If PL MPL L Substitute K for L If K MPL (and real wage increases)...
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CAPITALCLASS - 1 CAPITAL & Interest 1 In the...

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