Lecture 8
Macroeconomics

Opening
Prayer

Quizmaster

Chapter 9
The Financial
System

Finance
Money put at
risk over time

We buy things
with money, but
we pay for them
with time

Time is the coin of
your life. It is the only
coin you have, and
only you can
determine how it will
be spent. Be careful
lest you let other
people spend it for
you.
Carl Sandberg

Money is Time

Interest in the
rental rate we pay
on money.

Savers ,
Lenders,
Investors
Borrowers
Money
Market
Interest
Rate
Quantity

I.O.U.

Other People’s
Money
Leverage

Debt
Equity
=
Leverage Ratio

Leverage Ratio
Other’s Money
My Money
=

$50
$50
=
1
Leverage Ratio

$90
$10
=
9
Leverage Ratio

Leverage
Start with $10
Borrow $90
Buy for $100
Sell for $110
Payback $90
End with $20
Double your $10

Leverage
Start with $10
Borrow $90
Buy for $100
Sell for $90
Payback $90
End with $0
Lost your $10

Leverage
Start with $10
Borrow $90
Buy for $100
Sell for $80
Payback $90
End with -$10
Bankruptcy

Exam 1
Friday September 23
3 hours
Canvas
Chapters 1-7, 9
Multiple Choice
Short Answer

Concepts
Opportunity Cost
Comparative Advantage
Demand and Quantity Demanded
Price Ceilings and Price Floors
GDP
GDP per Capita
Nominal vs. Real
Rule of 70s
Time Preference
Financial Intermediaries
Capitals of Innovation
Worldview
Your Country