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

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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 What’s 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 ↑→ Δ Y/ Δ 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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This note was uploaded on 10/25/2011 for the course ECONOMICS 01:220:103 taught by Professor Sheflin during the Spring '08 term at Rutgers.

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

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