define capital according to Marshall?
Answers
Answer:
Marshall's theory of capital was designed to serve two main purposes: an integration of the theory of income distribution into a general theory of value and the closing of the gap between economic theory and business practice.
Answer:
Two key objectives of Marshall's theory of capital were to bridge the gap between economic theory and business practise and to include the notion of income distribution into a general theory of value.
Explanation
The capital was viewed as a general source of income, or "all things other than land which give revenue," for the first function, where it served as compensation for the services of a particular factor of production. Due to the obvious inconsistency between the two conceptions of capital, this implied some ambiguity. The inclusion of three separate theories of capital, held together by a demand-and-supply determination of the interest rate that provided a link with the theory of substitution, defined the final configuration of the Marshallian system.
Everything was given a part to play, including productivity and prospects, work and waiting, and objective and real costs, yet the outcome was still very contentious. The creation of a functional connection between the theory of value and the theory of money was Marshall's theory of capital's main accomplishment. In the absence of monetary policy, Marshall had a "real" theory of the long-term determination of the rate of interest. However, he believed that monetary considerations may have an impact on the current level of the rate of interest.
The "actual" interest norm would be impacted by an active monetary policy, as well as occasionally deviate from it. This relatively new perspective was a substantial step towards the unification of real and monetary theory.
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