Exam 3 - Chapter 14 Flashcards Preview

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Flashcards in Exam 3 - Chapter 14 Deck (10):
1

3 examples of Future Claims in a financial market

Loans
Stocks
Insurance Premiums

2

5 examples of Buyers (Borrowers)

Families buying a house
Student taking loans for college
Corporations building factories
Entrepreneurs starting new ventures
Government

3

3 examples of Savers

buying stocks
giving loans
Putting money into mutual savings or savings accounts

4

Who serves as the intermediary between Borrowers and Savers in a financial market?

Banks

5

___ is when the bank makes cash more readily accessible when and where you want it.

Liquidity provision

6

Explain bank Risk Diversification

-bank relies on many borrowers to collect it's investment
-if the investment fails, bank will be able to recollect most of its money

7

What is the market for loanable funds? What does "loan-able" funds refer to?

-simplified graph
-shows buyers and sellers

*dollars available between buyers and sellers is the loanable funds

8

In the market for loanable funds, what is the Demand and Supply?

Supply = Savings
Demand = Investments

9

3 determinants of Investment curve in Market for Loanable funds?

-future profitability of investments
-Uncertainty
-Government Deficit

10

Determinants of Savings?

-Economic Conditions (Boom or Recession)
-Uncertainty
-Culture
-Social Welfare
-Wealth
-Borrowing Consraints
-Expectations about future Economic Conditions