ECON 248 8.2 Saving Investment In The National Income Accounts

() refers to how various numbers are defined and added up.

Accounting

An equation that must be true based on how the variables are defined.

Identity

GDP is calculated as the following with Y representing GDP

Y = C + I + G + NX

An economy which doesn’t interact with other economies.

Closed Economy

An () economy is an economy which interacts with economies around the world.

Open

Since closed economies don’t engage in trade the equation for GDP doesn’t include ().

Net Exports

Saving () investment.

Equals

In an equation where S is national saving and I is investment, we calculate the following.

I or S = Y - C - G

Another calculation for finding total savings is where T represents total government spending and collection from households in the form of taxes.

S = (Y - T - C) + (T - G)

The amount of income that households have left after paying their taxes and paying for their consumption.

Private Saving

Private Saving is calculated as…

Y - T - C

The amount of tax revenue that the government has left after paying for its spending.

Public Saving

The calculation for public saving is the following:

T - G

If T is higher than G, it is a () since the government receives more money than it spends.

Budget Surplus

If T is less than G it is a () since the government spends more than it receives

Budget Deficit

() occurs when a person’s income () consumption and put money into a bank, stock, or bond.

Saving, Exceeds

() refers to the () of new capital, such as equipment or buildings.

Investment, Purchase