ECO 1102 Lecture Notes - Lecture 8: Loanable Funds, Government Debt, Dow Jones Industrial Average

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26 Apr 2016
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ECO 1102 Full Course Notes
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ECO 1102 Full Course Notes
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Eco 1102: saving, investment, & the financial system. Financial system: the group of institutions in the economy that help to match one person"s savings with another person"s investment. Financial institutions can be grouped into two categories: financial markets, financial intermediaries. Financial markets: financial intuitions through which savers can directly provide funds to borrowers: the bond market. Bond: a certificate of indebtedness that specifies the obligation of the borrower to the holder of the bon. Debt finance: the sale of bond to raise money. The bond"s credit risk: the stock market. Stock: represents ownership in a firm and is, therefore, a claim to its profits. Equity finance: the sale of a stock to raise money. The prices at which shares trade on stock exchanges are determined by supply and demand for the stock. Stock index: is an average of a group of stock prices. Financial intermediaries: financial institutions through which savers can indirectly provide funds to borrowers.

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