Chapter 4 THE CIRCULAR FLOW
Chapter 4 THE CIRCULAR FLOW
4.1 THE EXPANDED CIRCULAR FLOW MODEL
4.1 THE EXPANDED CIRCULAR FLOW MODEL
4.2 GOVERNMENT FINACIAL MARKETS AND INTERNATIONAL MARKETS >4.2.1 Government the provision of law and order services the provision of goods and other services improving equity in the distribution of income influencing the general economic climate
4.2 GOVERNMENT, FINACIAL MARKETS AND INTERNATIONAL MARKETS ➢ 4.2.1 Government ⚫ the provision of law and order services; ⚫ the provision of goods and other services; ⚫ improving equity in the distribution of income; ⚫ influencing the general economic climate
4.2.2 Financial markets Meaning Financial institutions through which savers can directly provide funds to borrowers Borrowers -demanders of finance households, firms and governments that choose to spend more than they earn in income or collect in revenue at some point in time Savers -suppliers of finance households, firms and government that choose to spend less than they earn in income or raise in revenue at some point in time Saving part of income or revenue that is not spent at some point in time or the postpone spending until some time in the future
4.2.2 Financial markets ➢ Meaning ⚫ Financial institutions through which savers can directly provide funds to borrowers. ➢ Borrowers – demanders of finance ⚫ households, firms and governments that choose to spend more than they earn in income or collect in revenue at some point in time. ➢ Savers – suppliers of finance ⚫ households, firms and government that choose to spend less than they earn in income or raise in revenue at some point in time. ➢ Saving ⚫ part of income or revenue that is not spent at some point in time, or the postpone spending until some time in the future
1 The Bond market Bond a certificate of indebtedness that specifies the obligations of the borrower to the holder of the bond (IOU Attributes term: the length of time until the bond matures credit risk: the probability that the borrower will fail to pay some of the interest or principal( default) tax treatment: the way in which the tax laws treat the interest earned on the bond
1. The Bond Market ➢ Bond ⚫ a certificate of indebtedness that specifies the obligations of the borrower to the holder of the bond. (IOU) ➢ Attributes ⚫ term: the length of time until the bond matures ⚫ credit risk: the probability that the borrower will fail to pay some of the interest or principal. (default) ⚫ tax treatment: the way in which the tax laws treat the interest earned on the bond