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Chapter 13. - National saving equals private saving plus...

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Chapter 13. Saving and Investment. Financial Markets: Include bonds and stocks. Financial Intermediaries: Involve mutual funds and banks. o A way for savers to indirectly get funds to those who want to use them to invest. These two things compose the financial system. o Mainly definitional stuff, but know. Y = C + I + G + (X –M) o Take the GDP formula and assume away the rest of the world by taking away (X-M). Y = c +i+g. o Y – C - G = I o Y – C –G National savings. o National savings MUST equal investment. (Y-C-G = I) o Investment: Includes expenditures on houses, factories, etc. Not the “portfolio.” If there’s a demand for investment, there is a demand for the dollars to buy the stuff. Stocks and bonds, in this arena, are not included in investment. They are part of the financial system that allows money from savers to go to investors. o Since savings = investment, s = y – c – g. o S = (y – c – t) + (t –g) o ***Know this!***
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Unformatted text preview: National saving equals private saving plus public saving.*** Private saving is what’s left over out of gdp that has not been consumed by households and that the govt. has not taxed. T = taxes. If T –G > 0 – this is a budget surplus. The govt. is actually saving. If T + G < 0 – this is a budget deficit. The govt. is not saving. o This formula can be used to find out what public, private saving are. • Deficit, Debt. o Deficit: Yearly. o Debt: Total. o If you sum up all the surpluses and all the deficits and come out negative, you have a debt. o Debt: 12 trillion. o National debt: You need to talk about the debt held by the public. The total national debt is made up by the total debt held by the govt. + intra-governmental debt. • Intra-governmental—Money that the govt. lends itself. • 2007: The public debt to GDP ratio was 37%. • October 2008: 41%. • March 3, 2009: 46.7%....
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