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Question
All capital is wealth but all wealth is not capital. Explain why all wealth is not capital.
Answer in Brief
Solution
- Capital denotes "real capital," while wealth is defined as all economic commodities that are scarce and have a price. This is because wealth that is utilized for consumption is not considered capital.
- Consequently, not all wealth can be considered capital. A car, for instance, is affluence, but it is not capital.
- Wealth refers to all economic goods that are scarce and command some price. Capital refers to real capital, e.g. machines, factories, buildings, etc., which is further used in the production of other goods and services.
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