|
|
APC: The abbreviation for average propensity to consume, which is the proportion of income, usually measured as disposable income or national income, used for household consumption expenditures. It is found by dividing consumption by income. The average propensity to consume, abbreviated APC, most often pops up in discussions of Keynesian economics. The average propensity to consume is the average amount of total household income that is devoted consumption expenditures.
Visit the GLOSS*arama
|
|
|
|
                           NET INTEREST: The official item in the National Income and Product Accounts maintained by the Bureau of Economics Analysis measuring interest earned by the household sector for supplying capital services. This is one of five official factor payments making up national income. The other four are compensation of employees, rental income of persons, corporate profits, and proprietors' income. Net interest is usually less than 10 percent of national income, typically in the 6 to 8 percent range. In principle, net interest is considered payment for the productive services of capital. At first glance, this might not seem to make a great deal of sense. After all, interest is the payment for borrowing funds, is it not? Closer inspection, however, indicates that this is more reasonable than it might first appear.The key consideration is the close, very close, connection between financial markets and capital investment. - First, financial markets and capital investment are two alternative and competing investment opportunities. If firms in the business sector have a little extra revenue on hand, that is retained earnings, they are likely to compare the return generated from capital investment with the return obtained through financial markets. The one with the higher return gets the investment. This competition between physical capital and financial capital investment tends to equalize the returns.
- Second, financial markets are a primary source of funding used by the business sector to invest in capital goods. The return on capital investment, that is the profitability of capital, influences the interest rate business firms are willing to pay for borrowing funds. If capital investment generates greater profit, then the business sector is willing to pay a higher interest rate on borrowed funds.
The end result is that interest payments on loans used to finance investment in capital goods is, at least indirectly, compensation for the use of physical capital. While the lenders do not own the physical capital directly, their loans make production of the capital goods possible.While net interest is consider a payment for the services of capital goods, it is not the only factor payment entry in National Income and Product Accounts to do so. Although rental income of persons intends to capture payment for the services of land, a portion also includes payment for the services of capital. The same can be said for corporate profits, which does not distinguish between payment for entrepreneurship and capital ownership. Likewise, proprietors' income includes factor payments for the services of capital owned by proprietors, in addition to services provided by proprietors' labor, land, and entrepreneurship.
Recommended Citation:NET INTEREST, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2024. [Accessed: April 29, 2024].
Check Out These Related Terms... | | | | | | | | | |
Or For A Little Background... | | | | | | | | | | | |
And For Further Study... | | | | | | | | | | | | | |
Related Websites (Will Open in New Window)... | |
Search Again?
Back to the WEB*pedia
|
|
|
WHITE GULLIBON
[What's This?]
Today, you are likely to spend a great deal of time wandering around the shopping mall looking to buy either a wall poster commemorating the moon landing or storage boxes for your winter clothes. Be on the lookout for a thesaurus filled with typos.
Your Complete Scope
This isn't me! What am I?
|
|
|
A scripophilist is one who collects rare stock and bond certificates, usually from extinct companies.
|
|
|
"Something in human nature causes us to start slacking off at our moment of greatest accomplishment. As you become successful, you will need a great deal of self-discipline not to lose your sense of balance, humility and commitment." -- H. Ross Perot
|
|
CIFCI
Cost, Insurance, Freight, Commission and Interest
|
|
|
Tell us what you think about AmosWEB. Like what you see? Have suggestions for improvements? Let us know. Click the User Feedback link.
User Feedback
|
|
