ECON 1BB3 Lecture Notes - Lecture 8: Net Income, Government Debt, Loanable Funds

• School: McMaster University
• Department: Economics
• Course: ECON 1BB3
• Professor: Bridget O' Shaughnessy

Document Summary

Return = interest paid on bond (reason people purchase bonds) Long term higher interest rates than short term bonds. Riskier bond higher interest rate: stock (partial ownership) market. Return = dividend (share of profits) or capital gain. Purchase stock for per share this year, sell stocks for. next year difference in price = capital share. Governments do not sell bonds not possible for us to own the government of canada. Purchase stock at a price one day, but price goes down the next. Return on stocks typically greater than returns on bonds: stocks tend to be riskier capital loss possibility, bankruptcy lows treat stock and bond holders differently. Bond holders will be paid before stock holders last people to be paid if a company declares bankruptcy. Bankso provide loans to borrowers: accept deposits from savers, lend to a variety of types of actors in our economy government, household, firms.