Economics 1022A/B Lecture Notes - Lecture 4: Disposable And Discretionary Income, Government Budget Balance, Loanable Funds
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2 Mar 2018
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ECON 1022A/B Full Course Notes
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Financial institutions and finance markets: the institutions and markets in this chapter play a crucial role in the economy. Insolvency and illiquidity: a financial institutions net worth is the market value of what is has lent minus market value of what it has borrowed. If net worth is positive, the institution is solvent. Interest rates and asset prices: stocks, bonds, short-term securities and loans are collectively called financial assets, the interest rate on a financial asset is the interest received expressed as a percentage of the price of the asset. If the asset price rises, the interest rate falls. The answer depends on the price of the bond, if its then interest rate would be 10% a year. Funds that finance investment: figure 23. 2 shows flows of funds that finance investment. I + g + x = m + s + t: subtract g and x from both sides of the last equation to obtain.
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