Chapter 4: How Do Economic Agents Finance Themselves?

This chapter delves into the concept of financing for economic agents, exploring how they acquire the necessary resources for their activities through various means such as personal savings, loans, and market instruments.

Financing Operations

• Economic agents can have either a financing surplus or deficit based on whether their income exceeds or falls short of their expenses.

• Generally, households tend to have a financing surplus due to lower consumption compared to income. In contrast, businesses often face a financing deficit as their earnings may not cover investments. Similarly, governments structurally require financing due to public spending surpassing revenues.

• Economic agents seeking financing options can utilize self-funding (autofinancement), bank loans, or access financial markets where companies issue stocks and bonds while governments issue treasury bills.

• Increased public spending by governments can stimulate economic activity by supporting consumption and investment.