ABSTRACT
This chapter outlines a conceptual framework for the analysis of the capital structure of a dynamic economy. Capital structure is a collection of capital goods in given proportions. For the purpose of the present analysis, a dynamic economy is one in which the activity levels of production processes are changing (continuously or discretely). The collection of capital goods (tools, machines, materials-in-process) existing at any given time in the economic system normally reflects the material prerequisites of existing technology and production organization.1 For this reason, such a collection of goods cannot be changed arbitrarily. Any change of capital stock normally reflects either a change of production technology and/or a change of the activity level of at least some production process.
