Scot Wick Blog

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 9 The Real Economy in the Long Run Chapter 26 of 36 Saving, Investment, and the Financial System Section 4 of 25 … Bonds differ according to three significant characteristics, the bond’s 1· term 2· credit risk 3· tax treatment … 1· Term is the length of time from the date a bond is issued until the date it matures and must be paid back. Some bonds have short terms of a few months, while others have terms as long as 30 years. Long-term bonds are riskier than short-term bonds because holders must wait longer for repayment of principal. If a holder of a long-term bond needs money before the distant maturity date, the bond may have to be sold at a reduced price. In addition, long-term bonds are more affected by inflation: over time, rising prices reduce the purchasing power of the fixed interest payments and the principal that will be repaid in the future. To compensate for these two —price risk, and inflat...

Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 9 The Real Economy in the Long Run Chapter 26 of 36 Saving, Investment, and the Financial System Section 3 of 25 … In the broadest sense, the financial system · moves limited resources of the economy · from lender-savers, people who spend less than they earn · to borrower-spenders, people who spend more than they earn Savers save for various reasons, including put a child through college or for retirement. Borrowers borrow for various reasons, including buy a house or start a business. Savers supply their money to the financial system expecting later they will get it back with interest. Borrowers demand money from the financial system knowing they will later be required to pay it back with interest. … The financial system consists of various financial institutions that coordinate money flow between savers and borrowers. Financial institutions are grouped into two categories: 1 · financial markets, direct fina...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 9 The Real Economy in the Long Run Chapter 26 of 36 Saving, Investment, and the Financial System Section 2 of 25 … Imagine you start your own business, an economic forecasting firm. Before you can produce and sell forecasts, you must incur substantial set-up costs. You have to buy computers, furniture, and various equipment. Each of these is a type of capital good your firm will use to create and sell forecasting services. Where do you get the funds to invest in the needed capital goods? Maybe you have enough savings to pay for all of them. More likely you do not have enough of your own money to finance your business startup. So, you have to get the needed money from other sources. … There are various ways to finance capital investments. You could borrow the money from a bank, friend, or relative. With this you promise return the borrowed money at a later date and also pay interest for use of the money....

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 9 The Real Economy in the Long Run Chapter 26 of 36 Saving, Investment, and the Financial System Section 1 of 25 … Chapter 26 - Saving, Investment, and the Financial System - Topics Financial Intermediaries Key Numbers for Stock Watchers Saving and Investment in the National Income Accounts The Meaning of Saving and Investment The Market for Loanable Funds Supply and Demand for Loanable Funds Saving Incentives Investment Incentives Government Budget Deficits and Surpluses The History of U.S. Government Debt … saving and investment chochiku to toushi … … Grok chapter 26 summary: This chapter explores how the financial system coordinates saving and investment, linking them to key macroeconomic outcomes like capital accumulation, productivity, and long-run growth. …. The Financial System The financial system consists of institutions that: match savers — who supply funds with borrowers — who demand funds fo...

  Why Do Some Businesses Close Even Though They Are Profitable? … Per Figure 1 economists and accountants measure costs and profits differently. Economist view of the firm: An economist measures a firm’s economic profit as · the firm's revenue (sales) · minus the firm’s explicit + implicit costs … Explicit costs are those that require a money outflow – paying wages and the bills. Implicit cost includes money the firm owner could otherwise be making, including · profit from other investments such as in the stock market · working at a job for another firm … An accountant measures the firm's accounting profit as · the firm's revenue · minus only the firm's explicit, money outflow for costs of running the business Because the accountant ignores the implicit costs, accounting profit is larger than economic profit. … Per Figure 2 explicit costs are fixed at $800 and implicit costs are fixed at $700. From an accountant’s viewpoint: · at $800 sales the firm is ($800 - $800) bre...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 9 The Real Economy in the Long Run Chapter 25 of 36 Production and Growth Section 21 of 21 … Chapter 25 conclusion. Here we have discussed · what determines the standard of living in a nation · how government policies that promote economic growth can help raise the standard of living This chapter is summarized in one of the Ten Principles of Economics, #8: a country's standard of living depends on its ability to produce goods and services. Policymakers who want to encourage growth in living standards must · endeavor to increase their nation's productive ability · encourage rapid accumulation of factors of production · help ensure these factors are effectively employed … Economists have different views of government’s role in promoting economic growth. Most say most important is government must enforce property rights and maintain political stability. Some contend government should target and subsi...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 9 The Real Economy in the Long Run Chapter 25 of 36 Production and Growth Section 20 of 21 … Things government can promote and strengthen to increase productivity and living standards include 1· saving and investment 2· investment from abroad 3· education 4· health and nutrition 5· property rights and political stability 6· free trade 7· research and development 8· population growth … 8· population growth, continued The on-going debate over the effects of a growing world population includes these topics: a· Stretching natural resources b· Diluting the capital stock c· Promoting technological progress … c· Promoting technological progress. Some economists contend world population growth has powered technological progress and economic prosperity. If there are more people there are more scientists, inventors, and engineers to contribute to technological advance. Economist Michael Kremer supported this hy...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 9 The Real Economy in the Long Run Chapter 25 of 36 Production and Growth Section 19 of 21 … Things government can promote and strengthen to increase productivity and living standards include: 1· saving and investment 2· investment from abroad 3· education 4· health and nutrition 5· property rights and political stability 6· free trade 7· research and development 8· population growth … 8· Population growth The on-going debate over the effects of a growing world population includes these topics: a· Stretching natural resources b· Diluting the capital stock c· Promoting technological progress … b· Diluting the capital stock Some modern theorists of economic growth emphasize population growth effects on capital accumulation and use. According to these theorists high population growth reduces GDP per worker because fast growth in the number of workers forces a thin spread of the capital stock. Each worker...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 9 The Real Economy in the Long Run Chapter 25 of 36 Production and Growth Section 18 of 22 … Things government can promote and strengthen to increase productivity and living standards include 1· saving and investment 2· investment from abroad 3· education 4· health and nutrition 5· property rights and political stability 6· free trade 7· research and development 8· population growth … 8· Population growth Social scientists including economists have long debated how population affects a society. The direct effect of an increasing size population is more producing and consuming of goods. But a larger population does not always mean a higher standard of living for a society. The on-going debate over the effects of a growing world population includes these topics: a· stretching natural resources b· diluting capital stock c· promoting technological progress … a. Stretching natural resources Thomas Robert M...

  The Growing Productivity – Compensation Gap In recent years why hasn't workers’ compensation increased as much as productivity? Grok: In recent decades, particularly since the late 1970s, U.S. labor productivity (amount of product production per hour of work) in the nonfarm business sector has grown substantially faster than compensation for typical median income-level workers. From 1979 to 2025, productivity rose about 90%, while typical hourly compensation increased only around 33%. The two tracked closely until the late 1970s, but diverged afterward as gains increasingly flowed to top earners, executives, and capital owners (e.g. stockholders) rather than broadly across the workforce. … This gap persists due to a combination of structural and policy shifts that redirected productivity gains. Driving factors include declining unionization, weaker enforcement of labor laws, tolerance for higher unemployment to control inflation, stagnant real minimum wages for long periods, and ...