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Chapter 9: Learning Objectives

Chapter 9: Learning Objectives. Flow of Funds Analysis Relative Contribution of each sector The National Balance Sheet A “bridge” to the next section of the text. Principles and Conventions of National Income Accounting.

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Chapter 9: Learning Objectives

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  1. Chapter 9:Learning Objectives • Flow of Funds Analysis • Relative Contribution of each sector • The National Balance Sheet • A “bridge” to the next section of the text

  2. Principles and Conventions of National Income Accounting • National Balance Sheet vs. National Flow of Funds statement concepts, and their connection • Figure 9.1 : a diagrammatic exposition • By economic sector: • Households • Businesses • Governments • Foreign sector

  3. Income Statement & Balance Sheet

  4. Basic Identities A-L=NW FA(=M+OFA)+NFA-L=NW

  5. Figure 9.2: Flows of funds in the Canadian economy major sector

  6. Figure 9.3: A diagrammatic version of the flow of funds

  7. Problems with Flow of Funds Analysis • Distinction between capital vs. current spending ignored • Historical values vs. market values • Nominal vs. real values

  8. Summary • National Income accounting provides a way to summarize how financial flows are organized in the economy • The flow of funds matrix provides the actual measure of the relative financial position of different sectors in the economy

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