1. Instructor Sue Guzek
sguzek@ksu.edu or sueguzek@msn.com
Chapter 13 – Saving and Investment

2. Formulas
 GDP: Y = C + I + G + NX
 GDP closed economy: Y= C + I + G
 Investment: I = Y – C – G
 Saving equals Investment, so S = Y – C – G
 Saving also equals Private Saving + Public Saving
 S = (Y – C – T) + (T – G)
Definitions
 Saving = Deposit or purchase of stocks or bonds
 Investment = Purchase by firms of capital, buildings or
equipment (also purchase of new home)
 Saving is the source of Loanable Funds Saving is the
source of SUPPLY of Loanable funds
 Investment is the source of DEMAND of Loanable funds
 On the slides that follow, click to select the correct response
http://www.youtube.com/watch?v=MqVr2BhuGlA&feature=plcp

3.  Your family takes out a mortgage and buys a
new house
Click
Investment
Click
Saving

4.  Your family takes out a mortgage and buys a new house
Investment
Right!!!

5.  You use your $200 paycheck to buy stock in
Verizon (or ATT)
Click Investment
click Saving

6.  You use your $200 paycheck to buy stock in Verizon (or
ATT)
Saving
Right!!!

7.  Your roommate earns $100 and deposits it in her
account at a bank
Click
Investment
click Saving

8.  Your roommate earns $100 and deposits it in her account
at a bank
Saving
Right!!!

9.  You borrow $1000 from a bank to buy a car to
use in your pizza delivery business
Click Investment
Click Saving

10.  You borrow $1000 from a bank to buy a car to use in your
pizza delivery business
Investment
Right!!!

11.  According to the macroeconomic principles in the
text and the laws of supply and demand, a change
in the tax laws to increase taxes on investment
income will cause which of the following:
Supply of Loanable Funds
7%
6%
Interest 5%
Rate 4%
3%
2%
1%
0 1,200 1,600 Loanable funds $billions
Click 1. Increase the supply of loanable funds, 2. reduce the equilibrium
interest rate, 3. raise the equilibrium quantity of loanable funds
Click
1 Reduce the supply of loanable funds, 2. increase the equalibrium
interest rate, 3. lower the equilibrium quantity of loanable funds

12.  According to the macroeconomic principles in the
text and the laws of supply and demand, a change
in the tax laws to increase taxes on investment
income will cause which of the following:
Interest
Rate Supply and demand diagram of Loanable
7% Funds
6% S2
5%
4%
S1
3%
2%
1%
0 1,200 1,600 Loanable funds $billions
1 Reduce the supply of loanable funds, 2. increase the equilibrium
interest rate, 3. lower the equilibrium quantity of loanable funds

17.  End of Slide Show

18. Click here to
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