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Econ 1102 Week 6/Chapter 9 notes

by: Colin Fritz

Econ 1102 Week 6/Chapter 9 notes ECON 1102

Marketplace > University of Minnesota > Macro Economics > ECON 1102 > Econ 1102 Week 6 Chapter 9 notes
Colin Fritz
U of M

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About this Document

Notes on investing and saving.
Principles of Macroeconomics
David Bradley
Class Notes
Econ, 1102, week, 6
25 ?




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This 2 page Class Notes was uploaded by Colin Fritz on Sunday October 16, 2016. The Class Notes belongs to ECON 1102 at University of Minnesota taught by David Bradley in Fall 2016. Since its upload, it has received 2 views. For similar materials see Principles of Macroeconomics in Macro Economics at University of Minnesota.

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Date Created: 10/16/16
Econ 1102 Chapter 9 Notes Colin Fritz Saving and Investment Saving – income not spent on consumption goods Investment – purchase of new equipment, tools, factories etc. Consumption smoothing – saving during good years to help out the bad years. Also saving during working years for retirement  Consumption smoothing improves overall satisfaction Time preference – the desire to have goods and services sooner than later  This is important because the greater the preference for goods or services now the less you will be saving Market for Loanable Funds – occurs when suppliers of loanable funds (savers) trade with demanders of loanable funds (borrowers) Financial Intermediaries – reduce costs of moving savings to borrowers and investors The three types to know: Banks, Bond market, stock market Banks  Gather savings and reduce the cost of mobilizing savings for productive uses  There is a risk of the bank defaulting Bond Market Bond – An iou that documents who owns how much and when payments are issued  Lender - one who buys the bond  Borrower – one who issues the bond  Bonds have risk, the risk is asses by ratings companies like Standard and Poor’s and Moody’s Rate of Return = ((Face value – price) x 100)/ price Crowding out – when the government increases borrowing which in turn increases interest rate And private borrowing lessens


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