CH 26

The old adage, "Don't put all your eggs in one basket," is very similar to a modern bit of advice concerning financial matters:

"diversify"

Two of the economy's most important financial intermediaries are

bank and mutual funds

The price of a stock will rise if the

demand for stock rises

If there is a shortage of loanable funds, then the quantity of loanable funds

demanded is greater than the quantity of loanable funds supplied and the interest rate will rise.

Northwest Wholesale Foods sells common stock. The company is using

equity financing and the return shareholders earn depends on how profitable the company is.

a mutual fund

is an institution that sells shares to the public and uses the proceeds to buy a portfolio of stocks and bonds

The source of the supply of loanable funds

is saving and the source of demand for loanable funds is investment

long-term bonds are

riskier than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds.

The economy's two most important financial markets are

the bond market and the stock market

We associate the term debt finance with

the bond market, and we associate the term equity finance with the stock market.

national saving is

the total income in the economy that remains after paying for consumption and government purchases

Which of the following counts as part of the supply of loanable funds?

Bank deposits and purchases of bonds