midterm 2 equations - ECON 102 - Second Midterm - Important

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ECON 102 - Second Midterm - Important Equations/Concepts Savings Identity (including government and trade) Total Investment= Private Savings + (IM - EX) + (T-TR-G) **(T-TR-G) is the budget balance, which can be positive (budget surplus, which increases investment) or negative (budget deficit, which decreases investment)** Market for Loanable Funds Rate of Return: RoR = [(revenue-costs)/costs] x 100 **investor (demander of loanable funds) will accept any interest rate lower than RoR because can pay off interest with profit remaining** Demand for loanable funds firms are demanders, downward sloping shifts: change in expected profits - increases if expected rate of return rises, de- creases if expected rate of return falls Supply of loanable funds savers are suppliers, upward sloping because as interest rate offers rise, lend- ing becomes a more favorable option shifts: changes in private savings behavior (more savings increases supply of loanable funds) capital inflows - more foreign funds increases supply changes in expected profitability of lending when lending is less risky gains are more sure, so there is more lending
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midterm 2 equations - ECON 102 - Second Midterm - Important

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