FIN 3310 Lecture Notes - Lecture 2: Barter, Savings Account, Autarky

• School: St. John's University
• Department: FIN - FINANCE
• Course: FIN 3310
• Professor: Carlos Elias

Document Summary

We don"t need money to produce things in economics. In this class, we assume that we are sophisticated enough to have a financial system. In this class, we will be focusing on the financial markets of the circular flow of income and product. In a closed economy (no government involved), households will be giving (providing) money to the financial markets and firms will be borrowing from the financial markets. In real life, consumers invest: r= interest rates, there are many ways to save. You can save by putting money in your bank, buy bonds and stocks etc. That is the liquidity: more liquid in the right direction means it"s easier for the asset to be exchanged for money, bonds and stocks are relatively liquid. So, we have to sell and then get cash. The concept of liquidity is going to be essential to us.