Chapter 26:Savings, Investment and......
Terms
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- Financial System
- the group of institutions in the economy that help to match one person's saving with another person's investment
- Supply of loanable funds
- comes from people who have extra income they want to save and lend out
- Private Savings
- the income that households have left after paying for taxes and consumption
- Budget Surplus
- an excess of tax revenue over government spending
- Financial Markets
- financial institutions through which savers can directly provide funds to borrowers
- Equity Finance
- sale of stock to raise money
- Demand of loanable funds
- comes from households and firms who wish to borrow to make investments
- Closed Economy
- one that doesn't interact with other economies
- S = I
- show the saving and investment are equal for the economy as a whole, this does not have to be true for every individual household or firm
- Identities
- an equation that must be true because of the way the variables in the equation are defined
- Store of Value
- Stocks and Bonds
- Medium of Exchange
- They facilitate purchases of goods and services by allowing people to write checks against their deposits
- National Savings
- the total income in the economy that remains after paying for consumption and government purchases
- Municipal Bonds
- bond owners not required to pay federal income tax on the interest income
- Stock Index
- is computed as an average of a group of stock prices
- Open Economy
- they interact with other economies around the world
- Index Funds
- buy all the stocks in a given stock index
- Crowding out
- a decrease in investment that results from government borrowing
- Portfolio
- various types of stocks and bonds, or both stocks and bonds
- Stock
- a claim to partial ownership in a firm
- Default
- the probability that the borrower will fail to pay some of the interest or principal
- Market for loanable funds
- the market in which those who want to save supply funds and those who want to borrow to invest demand funds
- Term
- Length of time until the bond matures
- Financial Intermediaries
- financial institutions through which savers can indirectly provide funds to borrowers
- Budget Deficit
- a shortfall of tax revenue from government spending
- Principal
- The buyer of a bond gives his or her money to intel in exchange for this promise of interest and individual repayment of the amount borrowed
- Bond
- a certificate of indebtedness
- Public Savings
- the tax revenue that the government has left after paying for its spending
- Debt Finance
- sale of bonds
- Junk Bonds
- pay very high interest rates
- Accounting
- refers to how various numbers are defined and added up