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Ch 25 Saving, Investment and the Financial System

Ch 25 Saving, Investment and the Financial System. *p. 553-559 - review of financial terms learned in Micro stock market lessons. I. Saving and Investments in the National Income Accounts. *assume a closed economy for now Y = C+I+G (Income = Expenditures)

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Ch 25 Saving, Investment and the Financial System

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  1. Ch 25 Saving, Investment and the Financial System

  2. *p. 553-559 - review of financial terms learned in Micro stock market lessons

  3. I. Saving and Investments in the National Income Accounts *assume a closed economy for now Y = C+I+G (Income = Expenditures) • Subtract Consumption and Government from both sides Y-C-G = I • Y-C-G : tells us our income (Y) after we paid for C and G….so this is National Savings (S) • …..so Y-C-G = I ……= ……S = I *think back to AE model ….at Equilibrium , S = I • …so National Savings = …. S = Y-C-G

  4. If S = I : how is this coordinated in the economy????? • THE FINANCIAL SYSTEM TAKES IN A NATION’S SAVINGS AND DIRECTS IT TO THE NATION’S INVESTMENTS (p.563)

  5. National Savings is separated into Private and Public • *must consider taxes • Private Income (Y) must subtract private Taxes (T) and private Consumption ( C ) ….so Private Savings = Y-T-C • Public Income consists of Tax revenue (T) and subtract Government spending (G) …so Public Savings = T-G National Savings = Private Savings + Public Savings S = ( Y-T-C) + (T-G)

  6. II. Meaning of Saving and Investment • ***specific use of terms***

  7. III. Market For Loanable Funds Supply Curve: The Supply of What? ? Demand Curve: The Demand of What? ?

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