Author Question: Explain the meaning of the term dead capital, and discuss why its existence retards economic growth. ... (Read 33 times)

MirandaLo · **on:** Jun 30, 2018

Explain the meaning of the term dead capital, and discuss why its existence retards economic growth.

What will be an ideal response?

Question 2

A well-capitalized bank:

A) does not have stockholders' equity.
B) is prone to bank runs.
C) owns far more than it owes.
D) only accepts deposits but does not advance loans.

anyusername12131 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

Dead capital means a capital resource without a clearly defined owner. Although dead capital is often used in production the lack of clearly defined title of ownership typically leads to inefficient use of the resource. The inefficient use of dead capital reduces the rate of return on investments and thus the incentive to increase investment in capital goods are reduced. Lower levels of capital investment diminish the rate of economic growth.

Answer to Question 2

C