The Federal Reserve controls the amount of bank activity and thus influences a wide variety of interest rates. The government also has an impact on the.

Slides:



Advertisements
Similar presentations
Financial Institutions and Financial Markets To study the economics of financial institutions and markets we distinguish between Finance and money.
Advertisements

23 CHAPTER At Full Employment: The Classical Model.
AP macroeconomics Unit 4: Long Run Economic growth and loanable funds
Tutorial 3 ECON 111.
Copyright © 2009 Pearson Addison-Wesley. All rights reserved. Chapter 4 Interest Rate Measurement and Behavior.
Chapter 29 Rent, Interest and Profit
The Fed and The Interest Rates
Ch 27 Rent, Interest, & Profit. A.Economic Rent Price paid for land or other resources that are completely fixed in supply (perfectly inelasticity supply)
13 Saving, Investment, and the Financial System. FINANCIAL INSTITUTIONS IN THE U.S. ECONOMY The financial system is made up of financial institutions.
Copyright © 2008 Pearson Addison-Wesley. All rights reserved. Chapter 6 Determining Market Interest Rates.
Chapter 7: Savings and Investment
Copyright McGraw-Hill/Irwin, 2005 Economic Rent Determination of Land Rent Land Rent: A Surplus Payment Interest Loanable Funds Theory of Interest.
Chapter 7: Savings and Investment
1 Chp. 7: The Asset Market, Money and Prices Focus: Equilibrium in the asset market Demand and Supply of Money Quantity Theory of Money.
Chapter 7: Savings and Investment
24 FINANCE, SAVING, AND INVESTMENT © 2012 Pearson Addison-Wesley.
16:Investment, Capital, and Interest  Overview  How are business investment decisions made?  How are household saving decisions made?  How do investment,
Saving, Investment, and the Financial System
Capital Markets. Interest Rates What are some major interest rates in financial markets? Be as specific as possible.
McGraw-Hill/Irwin © 2009 The McGraw-Hill Companies, All Rights Reserved Chapter 9 The Financial System, Money, and Prices.
Ch. 7. At Full Employment: The Classical Model
... are the markets in the economy that help to match one person’s saving with another person’s investment. ... move the economy’s scarce resources.
Money Market and Loanable Funds Two Day Unit. Money Market Money supply (vertical) vs. money demanded (downward sloping) X-axis: Quantity of money Y-axis:
Principles of Macroeconomics: Ch. 13 First Canadian Edition Overview-8 u Financial Markets and Intermediaries u Saving and Investment u Market for Loanable.
Rent, Interest, and Profit Chapter 14 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
Showing the Effects of Monetary Policy Graphically 1 Three Related Graphs: Money Market Investment Demand AD/AS.
SAVING, INVESTMENT, AND THE FINANCIAL SYSTEM
ECN 202: Principles of Macroeconomics Nusrat Jahan Lecture-5 Saving, Investment & Financial System.
1 Ch. 7. At Full Employment: The Classical Model The relationship between the quantity of labor employed and real GDP What determines the full-employment.
Macroeconomics Lecture 5.
Money and Capital Markets 6 6 C h a p t e r Eighth Edition Financial Institutions and Instruments in a Global Marketplace Peter S. Rose McGraw Hill / IrwinSlides.
1 Chapter 3 The Role of Money and Credit © 2000 South-Western College Publishing.
Principles of Macroeconomics: Ch. 13 Second Canadian Edition Chapter 13 Saving, Investment and the Financial System © 2002 by Nelson, a division of Thomson.
© 2010 Pearson Education Canada. Beginning in August 2007 and running through 2008, global financial markets were in crisis. The epicentre of the crisis.
24 FINANCE, SAVING, AND INVESTMENT © 2012 Pearson Addison-Wesley.
12 CHAPTER Financial Markets © Pearson Education 2012 After studying this chapter you will be able to:  Describe the flow of funds through financial.
7 FINANCE, SAVING, AND INVESTMENT © 2014 Pearson Addison-Wesley After studying this chapter, you will be able to:  Describe the flow of funds in financial.
Financial Markets and Institutions PowerPoint Slides for: By Jeff Madura Prepared by David R. Durst The University of Akron.
Harcourt Brace & Company Chapter 25 Saving, Investment and the Financial System.
McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 16: Money, Prices, and the Financial System 1.Describe.
Problem Set Jan 14. Question 1  Money Definition (3 Pts ) – a current medium of exchange that is accepted for payment for a good/service  Example (2pts)
26 Investment, Saving, and the Real Interest Rate
12 CHAPTER Financial Markets © Pearson Education 2012 After studying this chapter you will be able to:  Describe the flow of funds through financial.
Determination of Interest Rates
Chapter 7: Savings and Investment Objectives Determinants of saving, investment, and interest rates Effect of government budget deficits Effect of international.
14 Rent, Interest, and Profit McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
Copyright © 2010 Pearson Education Canada. Beginning in August 2007 and running through 2008, global financial markets were in crisis. The epicentre.
Interest Rates 1. Interest Rates and Inflation If the nominal interest rate is 10% and the inflation rate is 15%, how much is the REAL interest rate?
14 The Federal Reserve and Monetary Policy. money market The market for money in which the amount supplied and the amount demanded meet to determine the.
Rent, Interest, and Profit Rent, Interest, and Profit.
McGraw-Hill/Irwin Chapter 17: Interest Rates and Monetary Policy Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
24 FINANCE, SAVING, AND INVESTMENT © 2012 Pearson Addison-Wesley.
Saving, Investment and the Financial System
Chapter 6 Measuring and Calculating Interest Rates and Financial Asset Prices.
THE MARKET FOR LOANABLE FUNDS. FINANCIAL MARKETS... are the markets in the economy that help to match one person’s saving with another person’s investment....
Monetary Policy Problem Set Answers 1. a) Money vs. Stocks vs. Bonds Money is anything that is generally accepted in payment for goods and services 2.
14 The Federal Reserve and Monetary Policy. money market The market for money in which the amount supplied and the amount demanded meet to determine the.
Ch 27 Rent, Interest, & Profit. A.Economic Rent Economic Rent Perfectly Inelasticity Supply Changes in Demand Land Rent: A Surplus Payment –Incentive.
Loanable Funds Market Module 29.
27 Rent, Interest, and Profit.
RENT, INTEREST, AND PROFIT Pertemuan 22
23 FINANCE, SAVING, AND INVESTMENT.
Rent, Interest, and Profit
Rent, Interest, and Profit
Rent, Interest, and Profit
Rent, Interest, and Profit
Rent, Interest, & Profit Chapter 16 1/2/2019.
Rent, Interest, and Profit
7 FINANCE, SAVING, AND INVESTMENT. 7 FINANCE, SAVING, AND INVESTMENT.
Loanable Funds Market Module 29.
Presentation transcript:

The Federal Reserve controls the amount of bank activity and thus influences a wide variety of interest rates. The government also has an impact on the lending process by granting special tax treatment for different types of interest.

Loanable Funds Theory Extending the model Financial institutions Changes in supply Household thrift Changes in demand Rate of return on investment Other participants LO2 14-2

Supply Of Loanable Funds In theory, supply and demand applies Supply in many forms Bank loans Bonds Stocks Economists disagree how much $ is actually available to loan Many variables

Loanable Funds Theory Quantity of Loanable Funds Interest Rate (Percent) 0 D S i = 8% F0F0 The equilibrium interest rate LO2 14-4

Time-Value of Money Money is more valuable the sooner it is obtained Ability to earn interest Compound interest Future value Present value LO3 14-5

Time Value of Money Beginning ValueComputationTotal InterestEnd Value $1,000 year 1 $1,000 X 1.10 = $1,100 $1,000$1,100 $1,100 year 2 $1,210 year 3 LO4 14-6

Time-Value of Money LO3 (1)(2)(3)(4) Beginning Period ValueComputationTotal InterestEnd Period Value $1000 (Year 1)$1000 X 1.10 = $1100$100$1100 (=$ $100) $1100 (Year 2)$1100 X 1.10 = $1210$210 (=$100 +$110)$1210(=$ $210) $1210 (Year 3)$1210 x 1.10 = $1331 $331 (= $100 + $110+ $121)$1331(=$ $331) 14-7

Time Value of Money Works in the other way What is an anticipated $1,000,000 in 2054 worth today? Go to Free On Line Calculator Use Future Value of Money LO3 14-8

The Price of Credit Effective interest rates Discounting a loan Repaying a loan in installments Effects of compounding Truth in Lending Act 1968 Truth in Savings Act 1991 Fees and teaser rates Let the borrower beware LO

Role of Interest Rates Relationship to: Total output Allocation of capital R&D spending Nominal and real rates Application: Usury Laws Nonmarket rationing Gainers and losers Inefficiency LO

Global Perspective LO

Feedback: Privacy Policy Feedback
Do Not Sell My Personal Information
About project: SlidePlayer Terms of Service

© 2025 SlidePlayer.com. Inc. All rights reserved.