Answered: f interest means higher levels of…

f interest means higher levels of loans, and therefore, higher level of investment in real capital equipment. With more c

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter3: Organizing And Financing A New Venture

Section3.5: Seed, Startup, And First-round Financing Sources

Problem 1CC

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Concept explainers

Flow of Funds

The flow of funds is the financial accounts of the nation, which monitor and control the cash flow among various sectors or industries, or markets. Central banks use these flow of funds statements to acquire macroeconomic data, to publish cash inflow and cash outflow statements of the nation. This flow of funds system is utilized to identify economic activity and changes in the economy. It is used by Federal Reserve to determine the Gross Domestic Product (GDP) of the nation and to implement monetary policy and fiscal policies.

Question

Lower rates of interest means higher levels of loans, and therefore, higher level of investment in real capital equipment. With more capital we would expect an economy to be more productive and to have higher levels or real income and economic growth.

Critically analyse this statement by connecting it with the financial intermediaries and how viral they are to a well-functioning financial system.

Definition Definition Increase in the amount of goods and services produced by a country in a given period of time compared to an earlier period. Economic growth is generally coupled with a rise in national income or the purchasing power of individuals. It is often measured in terms of the increase in a country's gross domestic product (GDP), or the overall monetary value of all the complete or final services and goods that a country can produce within its domestic boundaries in a specific period.

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