ECON 1010 Lecture 4: Finance, Savings and Investments
Document Summary
To study the economics of financial institutions and markets, we distinguish between. The study of finance looks at how households and firms obtain and use financial resources and how they cope with the risks that arise in this activity. The study of money looks at how households and firms use money, how much of it they hold, how banks create and manage it, and how its quantity influences the economy. Physical capital is the tools, instruments, machines, buildings and other items that have been produced in the past and that are used today to produce goods and services. The funds that firms use to buy physical capital are called financial capital. The purchasing of physical capital can be considered a type of 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 results from wear and tear, as well as well as obsolescence.
