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

lecture 13;14 ~ chapter 8.docx

4 Pages
Unlock Document

Hannah Holmes

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


Join OneClass

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

Sign up

Join to view


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.