What are capital goods?

Capital goods refer to tangible assets that are utilized in the production process to manufacture products or services. These goods are not finished products but rather items that are used to produce those final goods. Examples of capital goods include machinery, tools, buildings, and equipment. They play a crucial role in the economy as they help businesses generate outputs and increase productivity.

The reason this answer is the correct choice is that capital goods are the foundational elements of production that contribute to the efficient operation of businesses. Unlike intangible assets, which may include things like patents or brand recognition, or financial securities, which represent ownership in companies or debt obligations, capital goods have a physical presence and are essential for the production of goods and services. Additionally, natural resources are inputs used in the production process but do not fall under the definition of capital goods, which specifically relate to the tools and equipment needed for production.