Definition
Capital refers to assets, resources, or wealth—such as machinery, buildings, tools, or financial assets—that are used to produce goods and services and generate economic value. It is a critical input in the production process, distinct from labor and natural resources.
Why It Matters
Capital is essential for economic growth and productivity. Investments in capital goods allow firms to produce more efficiently, expand operations, and innovate. Economies with higher levels of capital generally experience faster growth, higher wages, and increased standards of living.
Example
A factory purchases new machinery to increase production. The machinery is a form of capital. Similarly, financial capital invested in a business allows it to fund operations, hire employees, and expand production, contributing to overall economic output.