ECON 1000 Chapter Notes - Chapter 8: Interest Rate, Autarky, Loanable Funds

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Stock: claim 2 partial ownership in a firm: equity finance: sale of stock 2 raise money, debt finance: sale of bonds. Stocks offer the holder higher risk and potentially higher return than bonds. Prices at which shares trade on stock exchanges determined by supply & demand 4 the stock in these companies. Stock index: computed as an average of a group of stock prices. Financial intermediaries: financial intermediaries: financial institutions through which savers can indirectly provide funds 2 borrowers, 2 most important financial intermediaries, banks, mutual funds, banks. Saving & investment in the national income accounts. & government purchases (y c g) S = i saving = investment: let t represent amount government collects from households in taxes amount pays back 2 households in form of transfer payments. S = y c g or s = (y t c) + (t g)

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