Which of the following best describes physical capital?

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BlackTom AI · Accepted Answer

Let’s break down each option to understand what physical capital means in the context of economics.
Option a: The knowledge and skills workers possess. This describes human capital, not physical capital. It refers to the capabilities that workers bring to production, such as education and experience, rather than tangible assets.
Option b: Natural resources like oil and minerals. These are typically categorized as natural resources or land inputs, sometimes called natural capital, but they are not physical capital. Physical capital specifically refers to man-made, durable inputs used in production, not natural resources.
Option c: The stock of equipment and structures used to produce goods and services. This matches the standard definition of physical capital: the man-made, manufactured inputs such as machinery, buildings, and tools that aid in production.
Option d: The financial assets held by businesses. Financial assets pertain to money, stocks, bonds, and other financial instruments. They are not physical inputs used directly in production, so this is not physical capital.

Thus, after evaluating each choice, option c correctly identifies physical capital as the stock of equipment and structures used to produce goods and services. The other options describe different forms of capital or inputs (human, natural, and financial) that do not fit the definition of physical capital.

EC301 Principles of Macroeconomics

Which of the following best describes physical capital?

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