Macro Chapter 8

Macro Chapter 8 - CHAPTER 8 SAVING, INVESTMENT, & THE...

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CHAPTER 8 CHAPTER 8 SAVING, INVESTMENT, & THE FINANCIAL SYSTEM
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Main Issues What are the main types of financial institutions in the Canadian economy, and what is their function? What are the three kinds of saving? What’s the difference between saving and investment? How does the financial system coordinate saving and investment? How do govt policies affect saving, investment, and the interest rate?
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The Financial System the group of institutions that help to match one person’s saving with another person’s investment. The financial system moves the economy’s scarce resources from savers to borrowers.
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Financial Institutions in the Canadian Economy Financial markets : institutions through which savers can directly provide funds to borrowers e.g.: Bond Market. Stock Market. Financial markets also link the present to the future: they enable savers to convert current income into future purchasing power, and borrowers to acquire capital to produce goods and services in the future.
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Bond Market Bond: a certificate of indebtedness that specifies obligations of borrower to the holder of the bond. Characteristics of a Bond Term: length of time until the bond matures. Credit Risk: probability that the borrower will fail to pay some of the interest or principal.
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Stock Market stock represents a claim to partial ownership in a firm and is therefore, a claim to the profits that the firm makes. sale of stock to raise money - equity financing. Compared to bonds, stocks offer both higher risk and potentially higher returns. Most important stock exchange in Canada is the Toronto Stock Exchange (TSX) Most important stock exchanges in the United States are the New York Stock Exchange, the American Stock Exchange, and NASDAQ.
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Stock Market stock tables provide information on: Price (of a share) Volume (number of shares sold)
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Macro Chapter 8 - CHAPTER 8 SAVING, INVESTMENT, & THE...

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