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Investment, Savings, and the Financial System definitions

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  • Economic Investment
    Allocation of resources by firms to increase future output, often through capital like factories or technology.
  • Financial Investment
    Placement of savings into assets such as stocks, bonds, or bank accounts to earn returns.
  • Capital
    Physical assets like factories, warehouses, or technology used to produce goods and services.
  • Savings
    Portion of income not spent on current consumption, typically held by households.
  • Financial System
    Network that channels funds from savers to firms, supporting investment and economic growth.
  • Financial Markets
    Platforms where savers directly provide funds to borrowers, such as through stocks or bonds.
  • Financial Intermediaries
    Institutions like banks or mutual funds that indirectly channel savings to firms.
  • Interest Rate
    Percentage return earned on savings or investments, often paid by intermediaries like banks.
  • Stocks
    Equity securities representing ownership in a company, purchased directly in financial markets.
  • Bonds
    Debt securities issued by firms or governments, allowing direct investment by savers.
  • Mutual Funds
    Financial intermediary pooling savings from many investors to invest in a diversified portfolio.
  • Credit Unions
    Member-owned financial intermediaries providing banking services and channeling savings.
  • Households
    Economic agents typically responsible for saving and financial investment activities.
  • Firms
    Entities that undertake economic investment to expand productive capacity and output.
  • Economic Growth
    Sustained increase in output and productive capacity, enabled by continuous investment.