24389967
Description
Flashcards by Sophia Lynch, updated more than 1 year ago
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Created by Sophia Lynch
over 4 years ago
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| Question | Answer |
| What are savings in regards to those kept at the bank? | Economy wide disposable income minus consumption purchases. |
| In a CLOSED economy, economy-wide investment equals... | economy wide savings. |
| In an OPEN-ECONOMY investment can to a greater or lesser part be funded by... | savings from overseas. |
| What are the 2 groups financial institutions can be classified into? | 1. Financial Markets 2. Financial Intermediaries |
| What are 'financial markets'? | Institutions through which savers can DIRECTLY provide funds to borrowers. Share market & bond market |
| What are 'financial intermediaries'? | Financial institutions through which savers can INDIRECTLY provide funds to borrowers. Banks, managed funds |
| What financing occurs through bond sales? | Debt financing. You owe the person. |
| What financing occurs through share (stock) sales? | Equity financing. Change of ownership. |
| What 2 things does the physical bond detail? | 1. When the principle of the loan is to be repaid 2. The rate of interest to be paid periodically until the loan matures |
| Why might a bond with a longer maturity rate have a higher interest rate? | More risk involved and uncertainty about what could happen in the future, for e.g. COVID19 |
| Who tends to issue bonds? | The government and credit agencies. |
| Do firms make money when shares are sold on the stock market? | Only when the firm issues new shares. If shares are being sold otherwise the firm does not profit. |
| What is the 'Share Index'? | An average group of share prices. They provide an index of the overall level of share prices. |
| What is a 'Managed Fund'? | An institution that sells shares to the public and uses the proceeds to buy a portfolio of shares. |
| In a closed economy, savings are always equal to...? | Investment S = I |
| What are 'National Savings'? | National disposable income that remains after paying for consumption and government purchases. |
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