MGEA06H3 Lecture Notes - Lecture 4: Loanable Funds, Nominal Interest Rate, Government Budget Balance

• School: UTSC
• Department: Economics for Management Studies
• Course: MGEA06H3
• Professor: Iris Au

Document Summary

Econ 4: chapter 10 savings, investment spending and the financial system. Both (physical) capital & human capital play important roles in determining long-run econ growth. Human capital largely provided by governments through public education. Physical capital, except infrastructure, mostly created by private investment spending (ex) spending by firms/households) Savings-investment spending identity: shows that investment must equal savings for the economy as a whole. *investment represents demand for funds, savings represents supply of funds. *equilibrium is when d = s, those who want to buy can buy, want to sell can sell, borrow can borrow, those who want to lend can lend, A closed economy is one that doesn"t trade with foreigners, x = 0 & im = 0. National income identity for a closed econ: Gdp = y = c + i + g. **since gdp (y) measures the total level of output & total level of income at the same time, two terms will used interchangeable.