A firm's demand for physical capital leads to its ________ and a household's supply of saving leads to its ________.

Question

Quizplus · Accepted Answer

The demand for physical capital by firms involves their requirement for machinery, land, buildings, and equipment to produce goods and services. To obtain these resources, firms need to finance their investments, which requires the demand for financial capital. On the other hand, households' supply of savings is provided to financial markets as they save their income for future use rather than spending it on immediate consumption. Therefore, the households' supply of savings leads to the supply of financial capital. Hence, option A is the correct answer.

A Firm's Demand for Physical Capital Leads to Its ________