Physical capital is the stock of produced goods that are inputs to production of other goods and services.

Land is the factor of production that nature supplies.

Together, capital and land are the tangible wealth of the economy.

Gross investment is the production of new capital goods and/or the improvement of existing capital goods. Net investment is gross investment minus depreciation of the existing capital stock.

A stock is the quantity of an asset at point in time. A flow is the stream of services an asset provides in a period of time.

The cost of using capital services is the rental rate for capital.

The price of an asset is the sum for which the asset can be purchased outright. The owner of a capital asset gets the future stream of capital services from this asset.

The present value of a future £1 is the sum that, if lent today, would cumulate to £1 by that date.

The nominal interest rate tells us how many actual pounds are earned by lending £1 for a year.

The real interest rate on a loan shown as the extra quantity of goods that can be purchased.

Saving is the difference between current income and current consumption.

The marginal value product of capital is the extra value of the firm’s output when another unit of capital services is used, all other inputs being held fixed.

The required rental on capital just covers the opportunity cost of owning the asset.

The functional income distribution is the division of national income between different factors of production.

The personal income distribution is the division of national income across individuals, regardless of the factor services from which these individuals earn their income.