ECON 114 Lecture Notes - Lecture 8: Loanable Funds, Government Debt, Dow Jones Industrial Average

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10 Mar 2016
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Chapter 8 saving, investment, and the financial system. Financial system: the group of insituions in the economy that help to match one person"s savings with another person"s investment. This chapter examines how the inancial system works. Financial insituions can be grouped into two categories: financial markets, financial intermediaries. Financial markets: inancial insituions through which savers can directly provide funds to borrowers. Bond: a ceriicate of indebtedness that speciies the obligaion of the borrower to the holder of the bond: debt inance: the sale of a bond to raise money. Characterisics: the bond"s term, the bond"s credit risk. Stock: represents ownership in a irm and is, therefore, a claim to its proits. Equity inance: the sale of a stock to raise money. The prices at which shares trade on stock exchanges are determined by the supply and demand for the stock. Stock index: is an average of a group of stock prices: dow jones industrial average, s&p/tsx composite index.

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