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Saving, investment & Financial system, => sale of bonds is called…
Saving, investment & Financial system
National saving=Investment
Private saving(Y-T-C)
Public saving(T-G)
T-G: Budget surplus
-(T-G): Budget deficit
=Y-C-G
Financial market: can
directly
provide funds
The bond market
Its credit risk
Tax treatment
A bond's term
The stock market
Financial intermediaries: can
indirectly
provide funds
Bank
Mutual funds
The market for loanable funds
Policy 2: Investment incentive
(increase D=> increase % => increase quantity of LF)
Policy 3: Government budget deficit
(decrease national saving & S=> increase %=> decrease quantity of LF)
Policy 1: Saving incentive
(increase S=>decrease%=>rise quantity of LF)
=> sale of bonds is called debt finance
=> sale of stock is called equity finance