EC140 Lecture : EC140 4.docx
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EC140 Full Course Notes
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Disposable income is split between savings and consumption. Total income can either be saved, consumed, or spent on taxes. Disposable income = total income taxes. Private saving minus investment = government saving foreign saving (equals 0) Equilibrium; one sector"s saving = another sector"s borrowing (s i) = (t - g) + (m x) If (t g) < 0 (the government is borrowing from either private individuals or the private sector. In later chapters, we will study money: physical capital: tools, instruments, machines, buildings, etc. produced in the past, and used today to produce other goods and services, financial capital: funds that firms use to buy physical capital. Investment in new capital is 30 during 2011: net investment in 2011 the increase in capital during the year. Ni = 30-20 = 10: so at end of year, total capital stock is 40. February 26th, 2013: wealth: the value of all the things that people own.
