1. Copyright © 2004 South-Western 26 Saving, Investment, and the Financial System Sparnaður, fjárfesting og fjármálakerfið

2. Copyright © 2004 South-Western FINANCIAL INSTITUTIONS IN THE U.S. ECONOMY Financial Markets (Fjármálamarkaðir) Stock Market (Hlutabréfamarkaður) Bond Market (Skuldabréfamarkaður) Financial Intermediaries (Milliliðir á fjámálamarkaði) Banks (Bankar) Mutual Funds (Verðbréfasjóðir)

3. Copyright © 2004 South-Western FINANCIAL INSTITUTIONS IN THE U.S. ECONOMY Financial markets are the institutions through which savers can directly provide funds to borrowers. (Á fjármálamarkaði starfa þær stofnanir sem gera sparendum mögulegt að koma fjármunum beint til lántakenda). Financial intermediaries are financial institutions through which savers can indirectly provide funds to borrowers. (Fjármálamilliliðir eru þær stofnanir sem gera sparendum mögulegt að koma fjármunum óbeint til lántakenda).

4. Copyright © 2004 South-Western Financial Markets The Bond Market A bond is a certificate of indebtedness that specifies obligations of the borrower to the holder of the bond. Skuldabréf er skírteini (viðurkenningarskjal) sem tilgreinir skuldbindingu lántakenda gagnvart þess sem bréfið á. IOU

5. Copyright © 2004 South-Western Financial Markets The Stock Market Stock represents a claim to partial ownership in a firm and is therefore, a claim to the profits that the firm makes. Hlutabréf felur í sér kröfu um eignarhluta í fyrirtæki og er þessvegna krafa til þess hagnaðar sem fyrirtæki skapar.

6. Copyright © 2004 South-Western Financial Intermediaries Banks take deposits from people who want to save and use the deposits to make loans to people who want to borrow. (Bankar taka innlegg frá fólki sem vill spara og notar innlegging til að bjóða þeim sem lán sem vilja lánsfé). pay depositors interest on their deposits and charge borrowers slightly higher interest on their loans. (geiða þeim sem leggja inn vexti á innlegg og krefja lántakendur um aðeins hærri vexti á útlánum).

7. Copyright © 2004 South-Western Financial Intermediaries Mutual Funds Verðbréfasjóðir A mutual fund is an institution that sells shares to the public and uses the proceeds to buy a portfolio, of various types of stocks, bonds, or both. (Verðbréfasjóður er stofnun sem selur hluti til almennings og notar afraksturinn til að kaupa verðbréfasafn samsett úr ýmsum hlutabréfum, skuldabréfum, eða hvorutveggja). They allow people with small amounts of money to easily diversify.

8. Copyright © 2004 South-Western Financial Intermediaries Other Financial Institutions Credit unions Pension funds Insurance companies Loan sharks

9. Copyright © 2004 South-Western SAVING AND INVESTMENT IN THE NATIONAL INCOME ACCOUNTS Recall that GDP is both total income in an economy and total expenditure on the economy’s output of goods and services: Y = C + I + G + NX

10. Copyright © 2004 South-Western Some Important Identities closed economyAssume a closed economy – one that does not engage in international trade: Y = C + I + G

11. Copyright © 2004 South-Western The Meaning of Saving and Investment Surplus and Deficit If T > G, the government runs a budget surplus because it receives more money than it spends. The surplus of T - G represents public saving. If G > T, the government runs a budget deficit because it spends more money than it receives in tax revenue.

12. Figure 5 The U.S. Government Debt Percent of GDP 17901810183018501870189019101930195019701990 Revolutionary War 2010 Civil War World War I World War II 0 20 40 60 80 100 120 Copyright©2004 South-Western