module saving, investment, and the financial system krugman's macroeconomics for ap* 22...
TRANSCRIPT
ModuleSaving,Investment, andthe Financial System
KRUGMAN'SMACROECONOMICS for AP*
22
Margaret Ray and David Anderson
What you will learnWhat you will learn
in thisin this ModuleModule::
• The relationship between savings and investment spending
• The purpose of the four principal types of financial assets: stocks, bonds, loans and bank deposits
• How financial intermediaries help investors achieve diversification
• Physical Capital
• The Source of Physical Capital
Matching up Savings andMatching up Savings andInvestment SpendingInvestment Spending
The Savings-Investment Spending IdentityThe Savings-Investment Spending Identity
• Assume a simple economy
• Total Income = Total Spending
• Total Income = Consumption + Savings
• Total Spending = Consumption+ Investment
• Consumption + Savings = Consumption + Investment .: Savings = Investment
The Savings-Investment Spending IdentityThe Savings-Investment Spending Identity
• Now, more complexity
•Budget Surplus
•Budget Deficit
•Budget Balance
•National Savings v. Private Savings
•Capital inflow
• Wealth
• Financial Asset
• Physical Asset
• Liability
The Financial SystemThe Financial System
Three Tasks of a Financial SystemThree Tasks of a Financial System
• Reducing Transaction Costs
• Reducing Risk
• Financial Risk
• Diversification
• Providing Liquidity
• Liquid
• Illiquid
Types of Financial AssetsTypes of Financial Assets
• Loans
• Bonds
• Default
• Loan-backed Securities (Collateralized Debt Obligation - CDO)
• Stocks
Financial IntermediariesFinancial Intermediaries
• Mutual Funds
• Pension Funds
• Life Insurance Companies
• Banks
• Bank deposit
• Fractional reserve banking