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ECON 252 CH 8 NOTES

ECON 252 CH 8 NOTES - National savings = Private Public...

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ECON 252 CH 8 NOTES The Financial System: financial institutions through which savers can directly provide funds to borrowers o Bond: a certificate of indebtedness o Stock: a claim to partial ownership Financial intermediaries: financial institutions through which savers can indirectly provide funds to borrowers (i.e. banks, mutual funds) Savings + Investment o Private savings = Y-T-C where Y = GDP, T = Taxes, and C = Consumption o Public savings = T-G, where G = Government Spending o
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Unformatted text preview: National savings = Private + Public savings = (Y-T-C)+(T-G) = Y-C-G = I, where I = investments o Budget surplus: an excess of tax revenue over government spending (T>G) o Budget deficit: a shortfall of tax revenue from government spending (T<G) • The Market for loanable funds: the market in which those who want to save supply funds and those who want to borrow to invest demand funds. o Crowding out: a decrease in investment that results from government borrowing...
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