ECON 20B Chapter Notes -Financial System, Reform War, Tax Credit
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ECON 20B Full Course Notes
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Document Summary
Financial system: group of institutions in the economy that help to match average person"s savings with another"s investments. Financial institutions in the u. s. economy: financial market. Financial institutions in which savers can directly provide funds to borrowers. Bond market: certificate of indebtedness (iou, date of maturity, interest rate, can resell bonds to others. Bond"s term: long-term bond risker than short-term: get higher interest rates. Credit risk: probability borrowers will fail to pay some of the interest/principal: eventual repayment of amount borrowed: junk bonds: very high interest rates. Tax treatment: way tax laws treat the interest earned on bonds: municipal bonds: bond owners not required to pay fed income tax on interest income (bond of state/gov) All of these institutions direct resources of savers into. Saving & investment in the national income accounts. Accounting: how various #s are defined and added up: important identities: Y = c + i + g + nx.
