ECON 1040 Lecture Notes - Lecture 30: Wall Street, World War I, Gdp Deflator
1 Dec 2016
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Document Summary
Financial market- market where people trade future claims on funds or goods. These classes can take different forms such as: loans, buying company stock, paying premiums. Financial markets allow funding to be used efficiently. A good market matches buyers and sellers for trade. Banks serve as intermediaries between savers/borrowers, have accessibility and liquidity, and allow ppl to diversify risk. Market for loanable funds-market for savers to supply funds to those who want to borrow. On a graph: savings is upward sloping, investments downward sloading. Factors: how much ppl want to save or spend between countries. Determinates of supply: c culture, welfare policies, wealth. Determinates of investment: investment is the tradeoff of cost of borrowing andpotention prfot, crowding out- the reduction in private borrowing because of an increase in gov borrowing. What does the market for loanable funds predict will happy to interet rates during expansion) but the interest rate is ambiguous.
