Principles of Economics- Mankiw (5th) 558

Principles of - 576 PA R T N I N E THE REAL ECONOMY IN THE LONG RUN 2 Why is it important for people who own stocks and bonds to diversify their

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576 PART NINE THE REAL ECONOMY IN THE LONG RUN 2. Why is it important for people who own stocks and bonds to diversify their holdings? What type of financial institution makes diversification easier? 3. What is national saving? What is private saving? What is public saving? How are these three variables related? 4. What is investment? How is it related to national saving? 5. Describe a change in the tax code that might increase private saving. If this policy were implemented, how would it affect the market for loanable funds? 6. What is a government budget deficit? How does it affect interest rates, investment, and economic growth? 1. For each of the following pairs, which bond would you expect to pay a higher interest rate? Explain. a. a bond of the U.S. government or a bond of an eastern European government b. a bond that repays the principal in 2005 or a bond that repays the principal in 2025 c. a bond from Coca-Cola or a bond from a software company you run in your garage d. a bond issued by the federal government or a bond
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.

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