Economy presentation Done by: Vanessa Liu, Hae Yeun

Individuals? Businesses? Governments? Individuals borrow money for two purposes – short-term and long-term. Short-term – it has higher interest rates due to higher risk for a financial institution Long- term – mortgage arrangement. Bank has the home as a security on the loan.

Individuals? Businesses? Governments? How does the businesses raise funds? Through raising equity by issuing shares, indirectly borrowing money from a financial institutions.

Individuals? Businesses? Governments? Government some times borrow money on purpose – raise the level of economy activity Increase spending or give tax cuts if the economy rate is slow. Spending > revenue Funding a major infrastructure project

May Budget?? Government borrows money as a results of the May Budget is because government expenditure > government revenue.

Factors affecting the demand for funds

Transactions Motive Carry out day-to-day living Examples : Make regular payments Carry out transactions

Precautionary Motives Unexpected future incidents. Required an immediate payment! Examples : Illness Car accident Children’s education fees Opportunity to purchase an asset at a lower price

Speculative Motives Future expectation! Example: An expectation for the value of a certain financial asset to fall An expectation for the value of the currency to rise

Thank you.