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YANKEE BOND: A bond issued with a dollar denomination in the United States by a foreign bank or corporation. This allows U.S. investors to invest in foreign securities without price fluctuations caused by exchange rates.
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Lesson 11: Circular Flow | Unit 2: Financial Markets
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Page: 10 of 22
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- The main function of financial markets, which is to divert national income from household consumption to business investment.
- The difference between the real or physical side of the economy (the production of goods that satisfy wants and needs) and the paper or financial side (legal claims on or ownership of physical resources, goods, and production).
- How income is diverted from legal-claim buyer to legal-claim seller through the financial markets.
- Why saving can be thought as a nonconsumption use of income, as making a loan, or as supplying income to the financial markets in exchange for a legal claim.
- Two basic reasons to save: (1) in return for an interest payment or (2) to accumulate income that can be spent later.
- Investment, which is business sector expenditures on gross domestic product for capital goods.
- How the business sector borrows income through financial markets and uses this income flow to finance capital investment.
- Why adding saving, investment, and financial markets does not change the total volume of the circular flow.
- That imbalances between saving and investment trigger economic stability, business cycles, unemployment, and inflation.
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MODEL An abstract representation of the real world that is usually based on scientific theories, principles, and hypotheses. A model is used to analyze economic phenomena by focusing on a small number of essential aspects of the real world. It is then manipulated to derive conclusions and implications that can be applied to the real world.
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PURPLE SMARPHIN
[What's This?]
Today, you are likely to spend a great deal of time at a garage sale hoping to buy either pink cotton balls or a genuine down-filled comforter. Be on the lookout for celebrities who speak directly to you through your television.
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This isn't me! What am I?
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During the American Revolution, the price of corn rose 10,000 percent, the price of wheat 14,000 percent, the price of flour 15,000 percent, and the price of beef 33,000 percent.
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"The time to repair the roof is when the sun is shining." -- John F. Kennedy, 35th U. S. president
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LRTC
Long Run Total Cost
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