(1) ch 13: savings, investment, and the financial system

what is savings

a vehicle for transferring purchase power to the future

what is investment

purchases of new capital, borrowing to finance those purchases

what is national income account identity used for and its equation

to determine how important macroeconomic indicators are related to each other, Y=C+I+G+NX

national saving = S=I, so it is equal to investment in a ______________

closed economy

what is private saving and the equation

leftover income households have after spending for consumption and paying taxes, Y-C-T

what is public saving and the equation

leftover tax revenue that the government has after paying for all of its spending, T-G

what is T, tax

the amount that the government collects from household in taxes minus the amount that the government pays for transfer payments

what is the government budget

the money that they are allowed to spend on purchasing in a given year

what is the government’s budget balance determined by?

whether they spend more or less than they take in that year

what is the government’s income?

tax revenue

when the government spends more than they collect in tax revenue, they run a __________________ , their public saving is T-G<0, so T __ G

budget deficit, <

when the government spends less than they collect in tax revenue, they run a ________________, their public saving is T-G>0 → G_____ T

budget surplus, <