Tuesday, November 18

Sources of investment finance

Sources of investment finance includes:
  • Private saving
  • Government saving
  • Borrowing from foreigners

Capital markets are influenced by fiscal policy in two ways:

  • Government spending and tax policy will generate either a budget surplus or a deficit, which will in turn contribute towards financing investment or "crowd out" private investment.
  • Tax policy will affect the amount saved. Taxes on interest earned will decrease the incentive to save.

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