wk. 7 monday notes
wk. 7 monday notes ECON 22061-001
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This 3 page Class Notes was uploaded by Marissa McKinney on Sunday October 18, 2015. The Class Notes belongs to ECON 22061-001 at Kent State University taught by Dandan Liu (P) in Summer 2015. Since its upload, it has received 27 views. For similar materials see Principles of Macroeconomics in Economcs at Kent State University.
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Date Created: 10/18/15
Chapter 13 Mon 101215 Financial institutions Financial systems A bridge someone who has extra money invests in someone with little money and eventually gets a return Financial markets ex Grocery store target giant eagle Walmart etc Bond if M write the bond you are the borrower Bond does not mean any sort of ownership in the business the borrower is using the money for Just means they own the money they lent out You are guaranteed to get your money back even if the rm goes bankrupt Stock share partial ownership no guarantee of getting money back Bond market the longer the borrowing period is the riskier it gets Longer term is a higher interest rate Usually only large corporations can enter into bond market Credit risk re ects how reliable you are as a borrower If you credit score is low you are riskier you will probably get a higher interest rate charged to you Municipal bonds pay the lowest interest rate because of tax treatment Financial intermediaries ex Banks Savers never meet borrowers in this situation Kind of like buying a house you only meet with the realestate agent Different kinds of saving Private saving Have to have income to save Everyone s total income real GDP Y real GDP T tax TY disposable income The income you can actually use Food clothes tuition cell phone bill etc C Consumption quotquotquotquotquotquot What you buy for your self quotquotquot What is left over is then your savings YTC Public saving Govt spending building highways paying soldiers paying for public schools etc T Tax revenue 6 Government spending TG public saving Public saving and private saving together is national saving Budget Defeicits and Surpluses De cit income is not enough for spending Surplus when there is a surplus we can have govt saving Surplus TG Public saving Defecit GT pubic saving National Saving National saving YCG Memorize formulas for midterms Saving and Investment Assume it is closed economy so that nx0 YCG In a closed economy national saving investment Quantity supplied quantity demanded Equilibrium The meaning of saving and investment Saving ex buying corporate bonds or equities Investment the purchase of new capital for future production Ex building a new factory or buying equipment for your business or building a new house N ECONOMICS INVESTMENT IS NOT THE PURCHASE OF STOCKS AND BONDS
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