Lecture_8_spring_2009

Lecture_8_spring_2009 - Lecture 8 Econ 2 Stock Market I...

Info icon This preview shows pages 1–21. Sign up to view the full content.

View Full Document Right Arrow Icon
Lecture 8 Econ 2
Image of page 1

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

View Full Document Right Arrow Icon
Stock Market I think the S&P 500 index 30 days from now will A) increase by more than 5% B) increase by 1-4% C) won’t change D) decrease by 1-4% E) decrease by more than 5%
Image of page 2
Housing Buying stock Buy: $20 Sell: $30 You make $10
Image of page 3

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

View Full Document Right Arrow Icon
Housing Short Selling If you think the price of the stock will fall: “Borrow” stock and sell for $30 Buy it back later for $20 You make $10
Image of page 4
Housing For most people housing is the largest asset If prices go up, you win If prices go down, you lose Hedging Short-sell the index for your area
Image of page 5

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

View Full Document Right Arrow Icon
National Saving and Its Components Private and Public Components of National Saving S public = T - G Includes Federal State Local
Image of page 6
National Saving and Its Components Private and Public Components of National Saving S = ( Y - T - C ) + ( T - G ) National Saving ( S ) is composed of saving by households, businesses, and government (federal, state, and local) Private Public
Image of page 7

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

View Full Document Right Arrow Icon
National Saving and Its Components Government Budget Deficit The excess of government spending over tax collections ( G - T )
Image of page 8
National Saving and Its Components Government Budget Surplus The excess of government tax collections over government spending ( T - G ) The government budget surplus equals public saving
Image of page 9

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

View Full Document Right Arrow Icon
National Saving, 1960-2004
Image of page 10
Investment and Capital Formation Investment Investment -- the creation of new capital goods and housing -- is necessary to increase average labor productivity. National saving is the source of funding for investment.
Image of page 11

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

View Full Document Right Arrow Icon
Investment and Capital Formation Investment Investment spending is undertaken if it is expected to be profitable (i.e., the benefit, or value of marginal product, exceeds the cost of the investment)
Image of page 12
Investment and Capital Formation Why has investment in computers increased by so much in recent decades? Benefits have been increasing over time from diffusion Cost of computing has fallen: Moore’s law
Image of page 13

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

View Full Document Right Arrow Icon
The number of transistors that can be Inexpensively placed on an integrated circuit Doubles every two years
Image of page 14
Investment in Computers and Software, 1960 - 2004
Image of page 15

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

View Full Document Right Arrow Icon
Saving, Investment, and Financial Markets Supply of Savings ( S ) The quantity supplied of saving is directly related to the real interest rate r Demand for Saving ( I ) The quantity demanded for saving is inversely related to r .
Image of page 16
Saving, Investment, and Financial Markets Market for Savings The market will determine the equilibrium ( r ). If r is above equilibrium, a surplus of savings will exist. If r is below equilibrium, a shortage of savings will exist.
Image of page 17

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

View Full Document Right Arrow Icon
The Supply and Demand for Savings Saving and investment Real interest rate (%) Investment I Saving S S, I r
Image of page 18
New Technology Saving and investment Real interest rate (%) I r E S I’ r’ F New Technology Raises the marginal productivity of capital This increases the demand for capital
Image of page 19

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

View Full Document Right Arrow Icon
Effect of Government Budget Deficit Saving and investment
Image of page 20
Image of page 21
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern