101chapter11

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

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11. Markets for Capital and Natural 11. Markets for Capital and Natural Resources Resources Financial markets Natural Resource markets
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Financial Markets Financial Markets Demand for financial capital Supply of financial capital interest rate financial capital = loanable funds
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Demand for Financial capital 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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interest rate Q funds D
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Shifts in demand for funds Shifts in demand for funds population growth increase demand for goods, increase demand for capital, increase demand for funds
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technology increase demand for new capital, increase demand for funds to finance it
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Government borrowing Federal gov’t deficits shift demand to the right
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Supply of Financial capital 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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Shifts in supply of funds 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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expected future income save today based on future needs -- retirement, college
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101chapter11 - 11. Markets for Capital and Natural...

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