ECO 111 Lecture Notes - Lecture 7: Loanable Funds

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Savings > consumers: not taxes, consumption is savings, accumulated savings = wealth. Y = c + i + g + nx. Tax revenue - government spending - net exports + private savings = investment (government surplus + foreign savings + private savings = investment) Why does foreign savings = - net export. We"re buying more from foreigners than we sell. Sf is borrowing from foreigners or foreigners are saving in the united states. Kt+1= kt-s+it: increase in investment today, increases future capital, increases gdp, increases gdp per labor unit, increases wages, increase in investment today, increases research and development, increases technology, increase gdp, increase gdp per unit of labor, increases wages. U. s. gov surplus as a % of gdp: (about -3% of the gdp) Private savings was about 10% in the early 80s, now about 1% Government surplus + private savings = national savings. If de cit spending increases, then government surplus decreases.

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