ECON-200 Lecture Notes - Lecture 14: Loanable Funds, Bond Market, Credit Risk
9 Sep 2020
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Document Summary
Learn about some of the important financial institutions in the australian economy. Consider the role of the financial system and how it is related to key macroeconomic variables. Develop a model of the supply and demand for loanable funds in financial markets. Use the loanable funds model to analyse how the interest rate is determined, and how market forces and various economic policies impact equilibrium saving and investment. Consider how government budget deficits affect the australian and world economy. Institutions through which savers can directly provide funds to borrowers. A bond is a certificate of indebtedness (iou) that specifies obligations of the borrower to the holder of the bond. Term: the length of time until maturity. Credit risk: the probability that the borrower will fail to pay some of the interest or principal. Tax treatment: the way in which the tax laws treat the interest on the bond.
