Textbook Notes (368,798)
Canada (162,167)
Economics (923)
ECN 204 (282)
Chapter 8

Chapter 8

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ECN 204
Christos Shiamptanis

ECN 204 Chapter 8Saving Investment And the Financial SystemFinancial System The group of institutions in the economy that help to match one persons saving with another persons investmentFINANCIAL INSTITUTIONS IN THE CANADIAN ECONOMYThe financial system moves the economys scarce resources from savers to borrowersFinancial MarketsFinancial institutions through which savers can directly provide funds to borrowersBond MarketStock MarketThe Bond MarketBonds a certificate of indebtness that specifies the obligations of the borrower to the holder of the bondborrwing from the public longterm bonds are riskier than short term longer time until principal is paidCredit risk the probability that the borrerwer will fail to pay some or all of the interest or principalProvincial govt is considered a higher risk than federal because they dont have as diversified economy as nationalCorporate bonds pay higher rates because of volatile nature of revenuesJunk Bonds paid by shaky companies at a high rate The Stock MarketStock represents ownership in a firm and is therefore a claim to the profits that the firm makesSelling of stock to
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