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25 Cards in this Set
- Front
- Back
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What are the key ingredients to long-run economic growth?
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Saving and investment.
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How does a dollar saved become a dollar invested?
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The financial system consists of those institutions that help to match one person's saving with another person's investment.
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An institution that helps to match one person's saving with another person's investment.
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Financial Institution
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What are the two types of financial institutions?
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Financial markets and financial intermediaries.
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A financial institution through which a person who wants to save can directly supply funds to a person who wants to borrow.
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Financial Market
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What are some examples of a financial market?
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The bond market and the stock market.
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A certificate of indebtedness.
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Bond
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A claim to partial ownership in a firm.
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Stock
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A financial institution through which savers can indirectly provide funds to borrowers. They stand between savers and borrowers.
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Financial Intermediary
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What are examples of a financial intermediary?
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Banks and mutual funds.
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An institution that sells shares to the public and uses the proceeds to buy a selection of stocks and bonds.
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Mutual Fund
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What is the market for loanable funds?
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When the economy has only one financial market.
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What do those who want to save and those who want to borrow do in the market for loanable funds?
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Those who want to save supply funds and those who want to borrow demand funds.
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What are some government policies affecting the market for loanable funds?
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Saving incentives, investment incentives, and government budget deficits and surpluses.
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Saving incentives shift the supply curve to the __.
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right
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Investment incentives shift the demand curve to the __.
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right
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A budget deficit shifts the supply curve to the __.
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left
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What is gross domestic product (GDP)?
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The total expenditure on the final goods and services produced in a country.
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If the country is a closed economy, what does Y = C + I + G + NX become?
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Y = C + I + G
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Why does I equal (Y - C - G)?
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The total income in the economy that remains after paying for consumption and government purchases. This amount is called national saving (S).
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Saving equals __.
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Investments
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The amount that the government collects from households in taxes minus the amount it pays back to households in the form of transfer payments (such as Social Security and welfare).
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T
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S = Y - C- G
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S = (Y - T - C) + (T - G)
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Private Saving
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Y - T - C
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Public Saving
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T - G
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