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101chapter11 - 11 Markets for Capital and Natural Resources...

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13:00 11. Markets for Capital and Natural Resources Financial markets Natural Resource markets
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13:00 13:00 2 Financial Markets Demand for financial capital Supply of financial capital interest rate financial capital = loanable funds
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13:00 13:00 3 Demand for Financial capital firms demand funds to finance capital purchases higher interest rate, more expensive to borrow lower Q demanded of funds
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13:00 13:00 4 interest rate Q funds D
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13:00 13:00 5 Shifts in demand for funds population growth increase demand for goods, increase demand for capital, increase demand for funds
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13:00 13:00 6 technology increase demand for new capital, increase demand for funds to finance it
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13:00 13:00 7 Government borrowing Federal gov’t deficits shift demand to the right
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13:00 13:00 8 Supply of Financial capital people’s savings decisions tradeoff between consuming today & consuming tomorrow Time preference higher interest rates encourage saving higher opportunity cost of current consumption higher Q supplied of funds
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13:00 13:00 9 Shifts in supply of funds population higher population, more saving supply shifts right income higher income, more savings supply shifts right
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13:00 13:00 10 expected future income save today based on future needs -- retirement, college
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