ECON 1BB3 Lecture Notes - Lecture 8: Loanable Funds, Riba, Mutual Fund

• School: McMaster University
• Department: Economics
• Course: ECON 1BB3
• Professor: Bridget O' Shaughnessy

Document Summary

Investing: purchases of new capital goods: e. x. Issued by large businesses and governments: earning riba, haram money based on the term and amount of risk, longer term = longer length, greater risk = higher riba, bigger, reputable companies are lower risk. Get paid after bondholders: 2) financial intermediaries-indirect link between borrowers and savers. Banks: provides loans to borrowers, takes deposits from savers. Mutual funds: people with small amounts of money to buy stocks together, actively managed v. s. index funds, actively managed-fund manager decides which stocks to buy-earn their income from fee charaged, index fund-follows stock market index. No active management, just competition of index. Market model: saving and investment model, based on national income accounting identity: y = c + i + g, ignore nx-assume closed economy (no trade) S = y t c + t g s = y c g s = i: market for loanable funds, interest rate as our vertical axis, demand: investment.