Economics 2152A/B Lecture Notes - National Wealth, Government Budget Balance
15 Nov 2012
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Flow variable: measured per unit of time, eg. Stock variable: measure at a point in time, eg. Most often, flow and stock variables are related to each other. A flow variable is rate of change in stock variable. Private disposable income (pdi) it measures the amount of income the private sector has available to spend. Pdi = y +nfp + tr + int t. Int interest payments on the government bond (borrowing) T taxes (t tr int): net government income. As for a household, the economic wellbeing of a nation depends not only on its income but also its wealth. National wealth = sum of households, firms and government wealth within a nation. National saving: private saving = pdi consumption. Spvt = (y + nfp +int +tr t) c: government saving = (t tr int) g. Sgovt < 0 government budget deficit: national saving (a+b) = (y + nfp + int +tr t c ) + (t tr int g)
