MGAB01H3 Lecture Notes - Lecture 11: Loanable Funds, Physical Capital, Government Spending

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MGAB01H3 Full Course Notes
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MGAB01H3 Full Course Notes
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Chapter 10 savings, investment spending and the financial system. The relationship between savings and investment spending for both closed and open economies. Factors that determine the demand for and supply of loanable funds. Determination of the interest rate in the market for loanable funds. Both (physical) capital and human capital play important roles in determining long-run economic growth (chapter 9). In canada, human capital is largely provided by governments through public education. Physical capital, with the exception of infrastructure, is mostly created by private investment spending (i. e. , spending by firms and households). In this chapter, we discuss how (physical) investment is financed. The savings-investment identity shows that investment must equal to savings for the economy as a whole, i. e. , In an equilibrium, level of savings, must always equal level of investment, where saving represents the supply of funds and investment represents the demand of funds, aka demand = supply. The savings-investment spending identity in a closed economy.

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