Principles of Macroeconomics: Saving, Investment, and the Financial System

Flashcards covering key concepts from the lecture on saving, investment, and the financial system in macroeconomics.

Saving

The portion of income not spent on consumption.

Investment

The purchase of new capital, such as buildings or equipment.

Financial System

A group of institutions that facilitate the flow of funds between savers and borrowers.

Financial Intermediaries

Institutions that connect savers and borrowers, allowing funds to flow indirectly.

Bond Market

A financial market where participants issue and trade debt instruments.

Stock Market

A market for buying and selling shares of publicly traded companies.

Principal

The original sum of money borrowed in a loan or the face value of a bond.

Credit Risk

The risk of default on a debt that may arise from a borrower failing to make required payments.

Municipal Bonds

Bonds issued by state or local governments, often offering tax-exempt interest.

Equilibrium Interest Rate

The interest rate at which the quantity of loanable funds supplied equals the quantity demanded.

National Saving

Total income remaining after consumption and government spending.

Public Saving

Tax revenue that the government has left after paying for its spending.

Budget Deficit

A situation where government spending exceeds tax revenue.

Crowding Out

Decreased investment due to increased government borrowing that raises interest rates.

Loanable Funds Market

Market where savers supply funds for loans to borrowers.

Investment Tax Credit

A tax incentive intended to encourage businesses to invest in capital.

Balanced Budget

A situation where government spending equals tax revenue.

Ten Principles of Economics

Fundamental concepts that guide economic behavior and decision-making.