Homework (Ch 13) e Due Today at 11 PM CST in a closed economy, saving and invest

Question

Homework (Ch 13) e Due Today at 11 PM CST in a closed economy, saving and investment must be equal, but this is not the case in an open economy. In the foilowing problem, you will explore are connected to the international flow of capital and goods in an economy. Before delving into the relationship between w saving and these various components of an economy, you will be asked to recall some relationships between apgregate variables that will be useful in your analysis. Recall the components that make up GOP, National income (Y) equals total expenditure on the economy's output of goods and services. Thus, where C- consumption,investment, G-government purchases, X - exports, M imports, and NX net exports: C+14G+NX of the nation that is left after paying for Rearranging the previous equation and solving for Y yields Y- components of GOP results in the following relationship Phgging this into the original equation showing the various This is equivalent to S , since net exports must equal net capital outow (NCO, also known as net foreign investment). in the the that a

Explanation / Answer

1. Y = C + I + G + NX

2. Taxes

3. Saving = Y - C - G

4. Y = C + G + Saving

5. Y = C + I + G + NX

Now, Y = C + G + Saving

So, C + G + Saving = C + I + G + NX

Saving = I + NX

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