13_Lecture_Slides_with_Graphs

13_Lecture_Slides_with_Graphs - Economics 104 Fall 2010 1...

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Economics 104 Fall 2010 1 The Economy in the Long Run Outline & Readings 1. Economic Growth — chapter 14 2. International Trade — chapter 15 3. Saving & Wealth — chapter 16
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Economics 104 Fall 2010 2 The Economy in the Long Run — Saving & Wealth Outline Saving and wealth — basics Priviate Saving Economy-wide Saving and Wealth Investment Key relationships Saving Wealth Saving Investment
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Economics 104 Fall 2010 3 1. Saving & Wealth - basics Some basic definitions Saving — current income less current expenditure For a household, we might have for any one year: saving = wage income + asset income (interest, dividends) - taxes - expenses s = ( y - t ) - c A flow measure; measured as a per unit of time. Saving can be negative — in this case, the household is consuming (reducing) their wealth . Saving Rate — saving per unit of (disposable) income. s y - t
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Personal Saving in Canada (Source: CANSIM Series v691565, v691566, v691725, v691726) -0.10 -0.05 0.00 0.05 0.10 0.15 0.20 0.25 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 Year Share of Personal Disposable Income Canada British Columbia
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Economics 104 Fall 2010 4 Wealth — assets minus liabilities (net worth). Wealth, net worth, can be increased by purchasing new assets (e.g. cash in the bank, shares in a company), or reducing liabilities (e.g. paying down mortgage or credit cards). Both are effectively saving. Wealth is also affected by capital gains or losses: change in the value of assets (change in prices). — not the same as depreciation of an asset In total, changes in wealth: Δ w = s + capital gains - capital losses
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Statistics Canada - Catalogue no. 13-595 22 Table 3.10a Composition, incidence, median and average amount of assets and debts Assets Median amount 1 Average amount 1 Have asset or debt $billion % $ $ % ASSETS 2,897 100 136,600 237,200 100 Financial assets 850 29 16,500 74,800 93 Within registered plans: 420 15 20,000 56,400 61 - RRSPs/LIRAs 343 12 20,000 51,200 55 - Other registered plans 77 3 10,000 43,000 15 Outside registered plans: 429 15 4,400 39,000 90 - Deposits in financial institutions 161 6 2,700 15,000 88 - Mutual/investment funds 80 3 13,000 46,200 14 - Stocks 92 3 8,700 74,700 10 - Bonds (savings and other) 25 1 2,500 14,500 14 - Other financial assets 70 2 8,000 64,900 9 Non-financial assets 1,693 58 103,000 138,600 100 Principal residence 1,104 38 125,000 149,700 60 Other real estate 235 8 65,000 117,000 16 Vehicles 126 4 9,000 13,300 77 Other non-financial assets 228 8 10,000 18,700 100 Equity in business 355 12 10,000 155,600 19 % DEBTS 458 100 29,000 55,200 68 Mortgages 355 78 69,000 82,800 35 Principal residence 304 66 67,000 76,100 33 Other real estate 51 11 60,000 88,600 5 Line of credit 26 6 5,000 13,500 16 Credit card and instalment debt 14 3 1,800 3,000 38 Student loans 15 3 7,300 10,400 12 Vehicle loans 29 6 9,000 11,200 21 Other debt 18 4 4,000 9,300 16 NET WORTH 2,439 1 for those family units with asset or debt Non -financial assets The most important of the non-financial assets was the principal residence; it accounted for 38% of total assets. Overall, 60% of family units owned their home. This proportion
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This note was uploaded on 01/28/2011 for the course ECON 104 taught by Professor Voss during the Winter '10 term at University of Victoria.

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13_Lecture_Slides_with_Graphs - Economics 104 Fall 2010 1...

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