Interest - seeds, he may promise to return 550 quintals...

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Interest: Capital goods are productive and they increase the future stock of goods. Therefore capital is said to be an asset which brings net return or additional income in the future course of time. Such net return on capital is called its rate of interest . Rate of interest may be both real as well as monetary in form. If we lend 500 quintals of wheat to a farmer during the planting season to be used as
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Unformatted text preview: seeds, he may promise to return 550 quintals after the harvest season. The additional 50 quintals he returns is the real interest on the capital lent. The rate of interest in this case is 10 percent. Since almost all economic transactions today are performed in currency units the rate of interest is charged and paid in monetary units....
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