Lecture #7 - Jan 30.docx

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Economics Lecture
Canada’s inflation slows to 2.3%
Ottawa Canada’s annual inflation rate eased more than expected in December to levels
closer to the bank of Canada’s 2% target, fiving the bank more flexibility to cut interest
rates is the economy were to take a turn for the worse
The Canadian dollar weakened to a session low of $1.0165 to the U.S
http://business.financialpost.com/2012/01/20/canadas-inflation-slows-to-2-3/
Know information for exam
Financial Institutions and Financial Markets
The study of money looks at how households and firms use it, how much of it
they hold, how banks create and manage is, and how its quantity influences the
economy
Physical Capital
Capital and Investment
Gross investment is the total amount spent on purchases of new capital and on replacing
depreciated capital
Depreciation is the decrease in the quantity of capital that results from wear and tear and
obsolescence
Net investment is the change in the quantity of capital
Net investment = Initial capital - ***
Wealth and Saving
Wealth is the value of all the things that people own
Saving is the amount of income that is not paid in taxes or spent on consumption
goods and services
o Saving increases wealth
Wealth also increase when the market value ****
Markets for Financial Capital
Saving is the source of funds used to finance investment
There finds are supplied and demanded in three types of financial markets
o Loan markets
o Bond markets
o Stock markets
Financial Institutions
A financial institution is a firm that operates on both sides of the markets for
financial capital
It is a borrower in one market and a lender in another
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