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Module Saving, Investment, and the Financial System KRUGMAN'S MACROECONOMICS for AP* 22 Margaret Ray and David Anderson
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What you will learn in this Module : 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
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Physical Capital The Source of Physical Capital Matching up Savings and Investment Spending
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The 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
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The Savings-Investment Spending Identity Now, more complexity Budget Surplus Budget Deficit Budget Balance National Savings v. Private Savings Capital inflow
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Wealth Financial Asset Physical Asset Liability The Financial System
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Three Tasks of a Financial System Reducing Transaction Costs Reducing Risk Financial Risk Diversification Providing Liquidity Liquid Illiquid
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Types of Financial Assets Loans Bonds Default Loan-backed Securities (Collateralized Debt Obligation - CDO) Stocks
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Financial Intermediaries Mutual Funds Pension Funds Life Insurance Companies Banks Bank deposit Fractional reserve banking
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