18 terms

AP Macroeconomics: Saving, Investment, and the Financial System

financial system
the group of institutions in the economy that help to match one person's saving with another person's investment
financial markets
financial institutions through which savers can directly provide funds to borrowers
a certificate of indebtedness, a debt finance
length of time until the bond matures
credit risk
probability that the borrower will fail to pay some of the interest or principal
tax treatment
the way tax laws treat the interest earned on the bond
a claim to partial ownership in a firm, an equity finance
financial intermediaries
financial institutions through which savers can indirectly provide funds to borrowers
mutual fund
an institution that sells shares to the public and uses the proceeds to buy a portfolio of stocks and bonds
national saving
the total income in the economy that remains after paying for consumption and government purchases
=GDP - consumption - government purchases
=investment (in a closed economy); also =(GDP - taxes - consumption) + (taxes - government expenditure)
private saving
the income that households have left after paying for taxes and consumption
public saving
the tax revenue that the government has left after paying for its spending
budget surplus
an excess of tax revenue over government spending
budget deficit
a shortfall of tax revenue from government spending
market for loanable funds
the market in which those who want to save supply funds and those who want to borrow to invest demand funds
crowding out
a decrease in investment that results from government borrowing