Class Notes (836,135)
Canada (509,645)
Economics (1,617)
ECON 1BB3 (535)
Lecture 13

lecture 13;14 ~ chapter 8.docx
Premium

4 Pages
77 Views
Unlock Document

Department
Economics
Course
ECON 1BB3
Professor
Hannah Holmes
Semester
Fall

Description
What do the terms ‘saving’ an ‘investment’ mean to a economist? Investment  purchases of new capital equipment (machinery, robots, factories) things that we can use to produce other goods and services - buying stocks and bonds is what households do with their savings - ASSUMING CLOSED ECOMONY (NO TRADE) Financial Institutions: 1. Financial markets  Directly link borrowers and savers  Between company’s a) Bond market:  Me buying bond = saver  Loan  issued by large business and governments  interest rates depends on the term (length) and the risk  longer term means higher rate of interest  higher risk means higher interest rate Ex. buying a bond issued by a company that has been established for 100, then thinking about buying a bond from a company that’s online and new company. Both are paying the same rate of interest  more likely to buy 100 year established bond, the new company would have to high a higher rate of interest b) Stock market:  Buying a piece of that company, part owner  If company makes profit and pays out a portion of that profit to the stock holders = dividend  Value of stock can go up and can sell for more = capital gain  Possibility of capital loss  The return on stocks is greater than bonds because: i. Riskier  have to pay a higher rate of returns than bonds ii. Bankruptcy laws  bond holders get paid before stock holders (adds more risk) 2. Financial intermediaries  Provide an indirect link between borrowers and savers  Between the individual saver & borrowers a) Banks:  Provide loans  Deposits from savers b) Mutual funds:  people with small amounts of money to buy stocks together Saving and investment:  National income accounting identity: Y = C + I + G - assuming this country lives in isolation  Private saving: Private saving = income – taxes - consumption o Y = GDP = expenditure = income o T = taxes C = comsunption  Public saving: (government) government s
More Less

Related notes for ECON 1BB3

Log In


OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit