Capital and Interest Theory

The Capital and Interest Theory explains how wealth is accumulated and used for future growth. Capital refers to resources, assets, or money invested today to generate further income or value over time. Interest represents the return earned on this invested capital, acting as compensation for the risk and opportunity cost of tying up resources. Essentially, the theory suggests that individuals or businesses invest their capital to earn interest, which then fuels ongoing investment, production, and economic development. It highlights the relationship between saving, investment, and economic growth, emphasizing that capital accumulation and the returns on that capital are fundamental drivers of prosperity.