Ch 26

This chapter focused on saving, investment, and the financial system. Overall, it wasn't too difficult of a chapter, and Mankiw does a pretty good job about explaining everything in scenarios that make sense and we can connect do. It does introduce a lot of new vocabulary words, which can make understand the chapter a bit more difficult, especially when they contradict what the word means casually. The chapter discusses bonds, stocks, and how the borrowing and lending business works and how it created an interest rate relevant to the needs and risks in the market. The U.S. financial system is made up of different financial institutions which act to direct the resources of household that want to save some of their income into the household and firms that want to borrow. National saving must equal investment, because one person's saving is another person's investment. The interest rate is determined by the supply and demand for loan able funds.