Chapter 8 - Saving and investment National income...

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Chapter 8 What do the terms 'saving' and 'investment' mean to an economist? Financial institutions: 1) financial markets - dirtily links brrowers & savers * bond market * loan * large businesses, government * terms; risk * stock market * ownership *profit ( dividends) or capital gain risk of capital loss *the return on stock is greater than bonds because: 1- riskier 2- bankruptcy laws 2) Financial intermediaries- intend link between brrowers & savers banks provide loans deposit from savers mutual funds people with small amounts of money to buy stocks
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Unformatted text preview: Saving and investment National income accounting identity: Y= C + Saving and investment Private saving: Sp= Y-T-C Public saving: Sg= T-C Budget surplus .. Market for loanable funds slope; shift factors demand negative slope firms must borrow to invest interest rate rises, borrow to invest interest rate rises, borrowing more expensive Supply Postive slope households: higher interest rate - ever dollars saved now = more future consuotion...
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This note was uploaded on 01/27/2011 for the course ECON 1B03 taught by Professor Hannahholmes during the Winter '08 term at McMaster University.

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Chapter 8 - Saving and investment National income...

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