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Unit 4 AP Macroeconomics
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Financial Markets
Financial Markets
channel private savings into investment spending and government borrowing
Real Interest Rates =
Real Interest Rates =
nominal interest rate - inflation
% increase in purchasing power that a borrower pays (adjusted for inflation)
3 Functions of Money
3 Functions of Money
1. medium of exchange
-accepted as a means of payment
-eliminates the complications of barter
2. unit of account
-a measurement of value
-allows comparison of prices
3. store of value
-store purchasing power for future use
asset
asset
anything of value that is owned
liabilities
liabilities
claims of the non-owners you have to give it back to someone if asked
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