Textbook Notes (368,317)
Canada (161,798)
Economics (818)
ECON 1100 (224)
Chapter 16

Chapter 16 Saving, Capital Formation, and Financial Markets

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ECON 1100
Eveline Adomait

Chapter 16: Saving, Capital Formation, and Financial Markets Tuesday, April 9, 20138:21 PM 16.1 Saving and Wealth Definitions Saving- current income minus spending on current needs; a flow Saving Rate- saving divided by income Wealth- the value of assets minus liabilities; also called net worth Liabilities- the debts one owes Capital Gains- increases in the value if existing assets Capital Losses- decreases in the value of existing assets 16.2 Why do People Save? Definitions Life-Cycle Saving- saving to meet long term objectives such as retirement, university attendance, or the purchase of a home Precautionary Saving- saving for protection against unexpected setbacks, such as the loss of a job Bequest Saving- saving done for the purpose of leaving an inheritance 16.3 Economy Wide Saving and Wealth Definitions Gross Saving- the sum of household, corporate, government, and non-resident saving Gross Investment- the sum of private sector and government investment National Saving- the sum of gross saving by the household sector, the corporate sector, and the government sector Non-Resident Saving- the balance between saving provided to the Canadian economy by non- residents and saving provided to foreign economies by residents of Canada International Capital Flows- purchases or sales of real and financial assets across international borders Capital Inflows- purchases of domestic assets by foreign households and firms Capital Outflows- purchases of foreign assets by domestic households and firms Net Capital Inflows- capital inflows minus cap
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