chapter 10

capital tools, instruments, machines, buildings, and other items that have been produced in the past and are used to produce goods and services
difference between physical and financial capital financial capital is used to purchase and operate physical capital
Examples of financial capital bonds, loans, stocks
relation of gross investment and net investment gross investment=net investment+depriciation
real interest rate The opportunity cost of the financial resources used to finance the purchase of capital
affect the demand for loanable funds loans, stocks, bonds
government budget, private savings reflects a use of loanable funds while______reflects a supply of loanable funds
real interest rate and quantity of loanable funds demanded the opportunity cost of investment is the real interest rate
real interest rate rises quantity of loanable funds demanded decreases
quantity of loanable funds demanded other things remained the same, the lower the interest rate, the greater the quantity of loanable funds demanded
government budget defecit the government budget defecits reflects a use of loanable funds while private savings reflects the supply of loanable funds
crowding out effect tendency for higher government budget defecits to increase investment

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