QUESTIONS FOR REVIEW

1. What is the role of the financial system? Name and describe two markets that are part of the financial system in the U.S. economy. Name and describe two financial intermediaries.

2. Why is it important for people who own stocks and. bonds to diversify their holdings? What type of financial institution makes diversification easier?

3. What is national saving? What is private saving? What is public saving? How are these three variables related?

4. What is investment? How is it related to national saving?

5. Describe a.change in the tax code that might increase private saving. If this policy were implemented, how would it affect the market for loan able funds?

6. What is a government budget deficit? How does it affect interest rates, investment, and economic growth?

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