ECON 100 Lecture Notes - Lecture 7: Loanable Funds, Interest Rate Risk, Money Market Fund
The more capital an economy can invest, the greater is gdp per capita. Connecting savers and borrowers increases the gains from trade and smoothens economic growth. Supply of savings: saving- income that is not spent on consumption goods. 2: four of the major factors that determine the supply of savings: during the retirement years. impatience. Investment- purchase of new capital goods: smoothing consumption. If you consume what you earn every year, consumption is high during your working. You can smooth your consumption by saving during the working years and dissaving. Saving also builds a cushion for unemployment or unexpected health problems. Most individuals prefer to consume now rather than later. The more impatient a person, the more likely that person"s savings rate will be low. Impatience is re ected in any economic situation where people must compare costs and. Time preference: the desire to have goods and services sooner rather than later (all else: marketing and psychological factors.