ECON 201 Lecture Notes - Lecture 12: Financial Capital, Capital Outflow, Human Capital
Document Summary
Econ 201 lecture 12 investment and saving basics. Savings is the part of income that is not spent. Income = consumption + savings: y = c + s, not a theory, but a fact, rearrange to get s = y-c, savings is whatever is left over after consumption. From the income accounting identity, we know that income = spending. Add government back in: y = c + i + g, the government will buy goods, tax people, and borrow money, taxes reduce income available for spending and saving. If this is negative, the government must borrow: deficit. If this is positive, the government can lend: surplus: so: Y = c + i + g. Y c g = i. Y t c + t g = i here, just add and subtract t on the left hand side of equation (y-t-c) + (t-g) = i. Substituting the equations we have from above, we can see that.
