LESSON 19
BOND 1. The bond is a certificate of indebtedness that specifies the obligations of the borrowers to the holder of the bond
MARKET 2. Although these bonds differ in many ways, three characteristics of bonds are most important. MA Bond’s term RK Its credit risk ET Its tax treatment FIN ANCIA1. The stock represents ownership in a firm and L is to therefore, a claim to the profits that the firm makes. 2. (1)Stocks and bonds are very different (equity finance, debt finance) (2) Stock sells on organized stock exchange 1 THE (3) The prices at which shares trade on stock STOCK exchange are determined by the supply and Financial MARKEdemand for the stock in these companies. T (4) A stock index is computed as an average of a group of stock prices (are available to institution monitor the overall level of stock prices) in the US economy He banks Banks 1 Banks’ role Financial intermediaries A medium of exchange 2 The difference between these rates of interest FINANCIcovers the banks’ costs and returns some profit to the AL owners of the banks. NTERME MutuaDIARIES l funds 1. Mutual funds is … 2. advantage Diversity Professional
Supply and 3 The market for loan able funds (supply and demand for Lon able funds ) 1. Would the law affect supply or demand? (affect demand ) 2. Which way would the demand curve shift? 3. Consider how the equilibrium would change?(if a reform of the tax laws encouraged greater investment ,the result would be higher interest rates and greater saving. ) demand for loan able funds 1. The market for loan able funds is … 2. Saving is the source of the supply of loan able funds. 3. Investment is the source of the demand for loan able funds. 2 Saving and investment in the economy THE MEANING OF SAVING AND INVESTMENT SOME IMPORTANT IDENTITIES 1. Y =C+ I + G 2. Y-C-G=I 3. S=I 4. S=Y-C-G=(Y-T-C)+(T-C) 5. Private saving Public saving Budget surplus Budget deficit Policy 1 Saving incentives If a reform of the tax laws encouraged greater saving, the result would be lower interest rate and greater investment. Policy 2 Investment incentives
DOES THE UNEMPLOYMENT RATE MEASURE WHAT WE WANT IT TO 1. IDENTIFING UNEMPLOYMENT
Policy 3 Government budget deficits and surpluses 1. Crowing out a decrease in investment that results from government borrowing. 2. Government budget deficits reduce the economy’s growth rate. 3. Higher investment, in turn, means greater capital accumulation and more rapid economic growth. HOW IS UNEMPLOYMENT MEASURED 1. THREE DETERMATIONS: want a job, able to work, can’t find a job 2. labor force :the total number of workers, including … 3. Unemployment rate =number of unemployment ÷labor force×100 4. labor-force participation rate ＝labor force ÷adult population ×100 1 discouraged workers 2. It is not perfect, but it is best to view the official unemployment rate as a useful but imperfect measure of joblessness
2. JOB SEARCH HOW ARE LONG THE UNEMPLOYED WITHOUT WORK 1. A short-term —is not a big problem A long term—a big problem 3. MINIMUM-WAGE LAWS
4. UNIONS AND COLLECTIVE BARGAINING 5. THE THEORY EFFICIENCY WAGES