MGEA06H3 Lecture Notes - Lecture 8: Human Capital, Loanable Funds, Demand Curve

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

Document Summary

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. , The savings-investment spending identity in a closed economy. A closed economy is an economy that does not trade with foreigners, i. e. , National income identity for a closed economy is. Gdp = y = c + i + g.