ECO102H1 Lecture Notes - Lecture 8: Loanable Funds, Opportunity Cost, Savings Account
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ECO102H1 Full Course Notes
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Eco102 lecture 8 introductory economics the financial system. Empirically: institution quality highly correlated with growth/wealth. Hypothesis i: high quality institutions growth/wealth. Hypothesis ii: wealth high quality institutions. If hypothesis 1 is true, then policy implication is clear. 10% off in 1500 urbanization=doubling of gdp/capita in 2000 the financial system. Often issued so that the seller can purchase or create a non-financial asset. Liquidity: how quickly an asset can be converted into cash. i. e. low liquidity: we need more time to sell it to get money. Example: asset 1: 100% chance it pays on dec 31 asset 2: 50% chance it pays on dec 31, 50% it pays 0. They both have the same expected return value. But asset 2 will have a lower current price. While everyone prefers less risk, risk tolerance varies. While everyone prefers more liquidity, liquidity preferences vary.
