Lecture1 - Saving and Investment Lecture 1: Introduction...

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1 Lecture 1: Introduction ECON435: Financial Markets and the Macroeconomy Anton Korinek Spring 2011 2 Saving and Investment Macroeconomic Definitions: Saving: consume less than your current resources so as to have more resources in the future Investment: put current resources to a productive use (e.g. build factories, …) produce more resources in the future 3 Financial Autarky Autarky = self-sufficiency (no market access) For an individual (or an economy) in autarky: saving = investment Example: a castaway on a tropical island 4 Roles of Financial Markets Financial markets allow for a separation of : savings decisions investment decisions Financial markets distribute resources (money) from savers to entrepreneurs if you want to save: you don’t need to create an enterprise and invest on your own if you want to invest: you don’t need to come up with all the money on your own 5 Roles of Financial Markets (ctd.) Consumption timing Information role of market prices
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Lecture1 - Saving and Investment Lecture 1: Introduction...

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