AK_Chapter_08 - Chapter 8 Questions for Review 1. 2. 3. 4....

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Chapter 8 Questions for Review 1. To match savings with investments. Bond market, stock market. Banks, mutual funds. 2. Reduce risk. Mutual funds. 3. S = Y - (C + G). Private saving = Y - (T + C). Public saving = T - G. S = private saving + public saving. 4. Purchase of new capital. I = S. 5. Consumption tax to replace the income tax? Increase supply of loanable funds => lower interest rates and increased investment. 6. A government spends more than tax revenue. Reduces national saving, raises interest rates, reduces private investment, reduces economic growth. Problems and Applications 1. a. The bond of an eastern European government. b. A bond that repays the principal in 2025. c. A bond from a software company you run in your garage. d. A bond issued Prince Edward Island. 2. Many answers are possible. 3. Help turning savings into investments. 4. People value stocks based on the expected future profitability of the firm. 5.
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AK_Chapter_08 - Chapter 8 Questions for Review 1. 2. 3. 4....

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