W3 Saving and Investment

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9 Terms

1
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Trade surplus occurs if
NX>0
2
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Trade deficit occurs if …
NX
3
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A rise in taxes … Yd
decreases
4
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A rise in gov spending … saving and investment (crowding out)
decreases
5
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Increase in gov budget deficits (gov dissaving)
gov needs to finance the deficit by borrowing → increase demand for funds in financial markets → lead to higher interest rate
6
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Fiscal stimulus package
for ex, decrease tax, increase gov spend → in long run, decrease S and I → crowding out
7
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Autonomous investment
eg: investment in R&D for new products, expansion of production capacity to meet anticipated future demand
8
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The Twin Deficits
Gov budget deficit (gov spend>revenue) + Trade deficit (IM>EX)
9
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