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UTA / Economics / ECON 3303 / In economics, what is meant by direct finance?

In economics, what is meant by direct finance?

In economics, what is meant by direct finance?

Description

School: University of Texas at Arlington
Department: Economics
Course: Money and Banking
Professor: Chi-young choi
Term: Fall 2018
Tags: Interest rates, Circular Flow Diagram, and markets
Cost: 50
Name: ECON 3303
Description: Study guide for Exam 1
Uploaded: 10/03/2018
4 Pages 190 Views 2 Unlocks
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Households: Most basic microeconomic unit  


What is a market?



Gov’t: levies taxes and uses the taxes to pay for everything  

Microeconomics Individuals

Macroeconomics  Aggregate  

SEC: Securities Exchange Commission  

Circular flow model  

Govt services markethouseholdresources marketfirms govt services  market

 (Consumption) (resource supply) (production input) (production  output)

Foreign sector  Goods and services market  

 (imports and exports)

Law of demand: ceteris peribus: all other things constant  

Resources market

Entrepreneurial skills and Factors of production: (Land, labor, capital) Don't forget about the age old question of Define accounting.

Decision made: political directive  socialistic economy (for production  and not demand.  


What is a market price?



Feudal system: new money makers/risk takers destroyed this statement.  

Income - tax = disposable income  

Y-T-C=S

Y-T = C+S

Y^d = C+S

GDP: Value of all the final goods and services produced within our  economy

Demand for GDP = C+I+G+ (X-M)

C=64-70% I=14-18% G=17-22% NX=-3 - -5%

GDP= 1. Real (Quantity)

2. Nomina(Value express in todays dollars  

Revenue GDP – cost of sales = gross profit  

Gross profit – selling, general, admin expenses = interest expenses Interest expenses – taxes = net income (net earnings)

Balance sheet converted to FCF’s  

A = L + E

Investments=  

1. Fixed= non-residential and residential  


What is the most basic microeconomic unit?



We also discuss several other topics like What is the formation of new neurons?
Don't forget about the age old question of Can cognitive processes be inferred from neuroimaging data?

2. Inventory (0.4% GDP)

production – sale= inventory goods  

graph: i vs q

Supply (positive slope): households, firms, govt, foreign sector. Demand (Negative slope): Household, firms, govt, foreign sector

Financial markets are also known as markets for loanable funds.

(Budget surplus) (short/large term capital financing)

Govt  Financial market  net income (net earning)

 

 (Budget deficit)  

Taxes – Govt spendings = Surplus/deficit  

What is a market?

Any mechanism bringing buyers and sellers together, so theu can transact in agreement  

(2 sides: sellers and buyers)

What is a market price?

Price at which market clears  

(willingness and affordability)  

Financial market:

Any mechanism that brings buyers and sellers to transact  Any mechanism facilitating origination and trade of financial assets with a  purpose of transferring loanable funds  

Assets = liability + equity

Asset: sources of probable economic benefits

Liability: sources of probable economic sacrifice

Equity: Claim to assets after liabilities are satisfied  

Assets acquired= borrowed (liability) or out of pocket (Equity) Assets: tangible and intangible (table from notes) If you want to learn more check out What are the components of a business plan?

Securities: claims to future income and existing assets of the issuer Currencies: money issued by central banking authority

Contracts: agreement to exchange other assets

Mutual funds distribute assets  

Go over:  

Primary Vs Secondary market  

Public vs private market

Debt vs equity market  

Liquidity: relative ease, speed, cost of converting asset into cash at low  transaction cost Don't forget about the age old question of What is hedged position?

Risk: uncertainty

Credit risk:  

1. Default risk: actual probability of the event actually taking place  2. Loss severity: actual loss if the event occurs, proportion or  percentage

Capital markets: longer term debt (longer than 1 year)

Equity instruments: (no maturity)

Treasury bills: issued by treasury department of US govt T-bills < 1 year < T-notes < 10 years < T-bonds

Commercial paper: short term debt issued by private entities Negotiable bank certificates of deposit (large denominations)

Bank reserves: legally required and excess (federal funds)  

Interest carried on: multiple instruments- no tax at all  

Municipal instruments: no federal tax on interest earned. Also not at state  and local.  

Centralized exchanges- centralized trading floor and centralized computer network  

Decentralized markets (over the counter- OTC)= not listed stocks  (internalization)  

Immediate delivery market: spot market

Future delivery market forward, futures, swap, option market

Option contract:  

1. Call option: sell

2. Put option: right to buy and sell at a specific time window at a  specific price

Derivative instruments: Asset devices its value from another underlined  asset  Don't forget about the age old question of Who is the daughter of numitor and the mother of romulus and remus?

Direct finance: funds are transferred directly from fund suppliers to users  Indirect finance: indirect via financial intermediary  

Financial intermediary: market makers (mutual funds)

Go through: mutual funds, pension funds, insurance companies, finance  companies, investment bank definitions.  

Economic growth increases, consumer wellbeing goes up

Go through: Depository institutions, mutual funds, investment companies,  functions of financial intermediaries.  

Interest rate

Go through:  

Conditions for investors and issuers.  

Future value = Present value (1+i)^N

N= [ln(FV/PV)]/ln(1+i)

(FV/PV)^1/N – 1 = i

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