Operation of Financial Markets

Operation of Financial Markets - no direct effect on the US...

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Econ 4.3 Wednesday, January 20, 1999 Announcements: Complete #1, 3, 5 from Chapter 2. The problem set is due on Friday 1/22. Pick a seat that will be your permanent seat. Lecture notes: Operation of Financial Markets Real Investment: Something that has been produced in the economy which can be used in the future to produce additional goods and services Ownership of stock in corporations is not what investment means in macroeconomic terms Investment is what a company does Savings accounts and stock in the stock markets are financial assetts Real Capital: Accumulation of investments made in the past. It is accumulated stock of goods and services that are used to create goods and services in the future. Some of investment is to replace things wearing out Doesn't increase, just maintains Gross Investment: total value of new things produced Net Investment: What you have that increases the capital after you have used the investment to maintain what you have Financial Investment: trading used assetts; a financial investment has
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Unformatted text preview: no direct effect on the US economy Define the following words: • Initial Public Offering (IPO) • Bond: a type of financial instrument that firms issue in exchange for cash • Stock • Investment Banker • Secondary Market • Dividends • Bond Interest Payments • Bad Prices and Interest Rate (show how related) • Governments (financial sense) • Munis: municipal information system • Stock Exchange • Over-the-Counter Market Production Possibility Frontier (cont'd) • Any point on the graph curve is efficient • What is the most economically efficient point? • Lumber (cord of wood) = 4 ft x 4 ft x 8 ft • 942 1lb books • 2000 lbs of paper • 61,370 #10 envelopes • 7,500,000 toothpicks • Opportunity Cost (measured in toothpicks) = 7,500,000 toothpicks / 942 books = 7,961 toothpicks/books • In an industry where output rises and productivity and value increases people expect higher salaries...
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Operation of Financial Markets - no direct effect on the US...

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