Chapter_26 - Chapter 26Chapter 13 Saving, Investment, and...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 26Chapter 13 Saving, Investment, and the Financial System WHAT’S NEW IN THE THIRD EDITION: The  Case Study  on "The History of the U.S. Government Debt" has been updated.  There is a new  In the  News  box on "Finance in China." LEARNING OBJECTIVES: By the end of this chapter, students should understand: some of the important financial institutions in the U.S. economy. how the financial system is related to key macroeconomic variables. the model of the supply and demand for loanable funds in financial markets. how to use the loanable-funds model to analyze various government policies. how government budget deficits affect the U.S. economy. CONTEXT AND PURPOSE: Chapter 13 is the second chapter in a four-chapter sequence on the production of output in the long run.  In Chapter 12, we found that capital and labor are among the primary determinants of output. For this  reason, Chapter 13 addresses the market for saving and investment in capital, and Chapter 14 addresses  the tools people and firms use when choosing capital projects in which to invest.  Chapter 15 will address  the market for labor. The purpose of Chapter 13 is to show how saving and investment are coordinated by the  loanable funds market. Within the framework of the loanable funds market, we are able to see the effects  of taxes and government deficits on saving, investment, the accumulation of capital, and ultimately, the  growth rate of output. 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
 Chapter 26/Saving, Investment, and the Financial System
Background image of page 2
Chapter 26/Saving, Investment, and the Financial System   3 KEY POINTS: 1. The U.S. financial system is made up of many types of financial institutions, such as the bond market,  the stock market, banks, and mutual funds.  All these institutions act to direct the resources of  households who want to save some of their income into the hands of households and firms who want  to borrow. 2. National income accounting identities reveal some important relationships among macroeconomic  variables.  In particular, for a closed economy, national saving must equal investment.  Financial  institutions are the mechanism through which the economy matches one person’s saving with another  person’s investment. 3. The interest rate is determined by the supply and demand for loanable funds.  The supply of loanable  funds comes from households who want to save some of their income and lend it out.  The demand  for loanable funds comes from households and firms who want to borrow for investment.  To analyze 
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/27/2009 for the course ECON 201 taught by Professor Munro during the Spring '09 term at University of Arizona- Tucson.

Page1 / 23

Chapter_26 - Chapter 26Chapter 13 Saving, Investment, and...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online