MGFB10H3 Chapter 1: Chapter 1 Notes
Document Summary
Households understanding wealth distributions within a country is a complex issue, however, a good starting point is to consider how borrowing and lending changes throughout the life cycle of individuals as they grow older. Summary of learning objectives: define finance and explain what is involved in the study of finance. Finance is the study of how and under what terms savings (money) are allocated between lenders and borrowers. Finance is not just about how resources are allocated but also under what terms and through what channels. Whenever funds are transferred, a financial contract comes into existence, and these contracts are called financial securities. The four sectors are government, business, households, and non-residents. On an aggregate level, the first 3 sectors own real assets. Households own positive net financial assets while governments and businesses own negative net financial assets, which mean net debt.
