What is the difference between real capital and financial capital? Why does concern with one type of capital invariably involve concern with the other?
Answer to relevant QuestionsWhy do nominal interest rates rise approximately 1-for-1 with increases in inflation?Suppose a perpetual bond pays $3000/yr to its owner. What is the price of the bond at 5 percent interest? At 6 percent?Suppose a certain species of tree grows according to the function B = 20√t, where B is the volume of lumber in the tree, measured in board-feet, and t is the tree’s age in years. If the interest rate is 0.05, at what age ...A village has six residents, each of whom has $1000. Each resident may either invest his money in a government bond, which pays 11 percent/yr, or use it to buy a year-old steer, which will graze on the village commons. ...Smith and Jones face the choice of driving to work early or late. If they both drive to work at the same time, each gets in the way of the other on the road, and so their daily commute takes longer and is more irritating. ...
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