ECON 1010 Chapter Notes - Chapter 8: Virtuous Circle And Vicious Circle, Demand Curve, Nominal Interest Rate

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Financial system: consists of those intuitions in the economy that help to match one person"s savings with another person"s investments; made up of various financial institutions. At any time, some people want to save income for the future and others want to borrow to finance investments. Financial systems moves economy"s scarce resources from savers to borrows. Savers supply their money to financial system with expectation that they will get interest. Borrowers demand money; they are required to pay interest. Government regulators set rules guiding operation of financial system. Bank of canada: regulates canadian financial system. These are the institutions through which a person who wants to save can directly supply funds to a person who wants to borrow. Bond is a certificate of indebtedness; specifies obligations of the borrower to holder of the bond; like an iou. Date of maturity: time by which the loan must be repaid.

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