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Lecture 12

Lecture 12 Oct 2.docx

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Department
Economics
Course
ECON 1BB3
Professor
Bridget O' Shaughnessy
Semester
Winter

Description
1BB3/Lecture 12/Oct 2 What do the Terms ‘Saving’ and  ‘Investment’ Mean to an Economist? Chapter 8 Investment: Not buying of stock and bonds in order to make a  return Saving: is a slow variable Financial Institutions: 1. Financial Markets (direct link between borrowers and  savers): the institutions through which a perso n who wants  to save can directly supply funds to a person who wants to  borrow • Bond market – making a loan (bond = loan)  o Loan o Large business, government o Term; risk • Stock market o Ownership o Profit (dividends) or capital gain o Risk of capital loss o The return on stocks is greater than bonds  because: i. Riskier ii. Bankruptcy Laws 2. Financial Intermediaries (indirect link between borrowers  and savers) • Banks o Provide loans to smaller companies, banks and  households o Primary objective is to take deposits from savers  and lend to borrowers • Mutual funds  o Allow people with small amounts of money to  get involved with buying stocks by buying as a  group • Actively managed mutual funds o Charge fees – Canada has the highest and most  obscure f
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