# Do capital goods have to be valued so that (discounted) real expected return on capital goods equal current present value of capital goods?

Let $P_k$ be the value of 1 quantity of a capital good. If one does not sell the capital good and keep it, the good provides interests.

In such a case, does standard macro say that all expected discounted real expected returns (or net present value of all future and present returns) be equal to $P_k$?

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Do you want to assume complete markets? If not, this need not be so. –  BKay Feb 17 at 15:56

## 2 Answers

Here is a somewhat standard presentation that might be taught in intermediate macroeconomics at US universities.

### Equilibrium Condition

The cost has to equal the value in equilibrium - the price has to equal the value of capital, otherwise:

• if the price was higher than the value, people who owned capital would try to sell it
• if the price was lower than the value, demand would be larger than supply of capital goods
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