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28 Sep 2019
I'm a bit confused about this question, help would be much appreciated.
The following macroeconomics equation describes an accounting identity (i.e. fact) relating national savings (S) to total investment (I), government spending (G), tax revenue (T), exports (X), and imports (M):
(S-I)= (G-T)+(X-M)
Assume a country has a net-zer trade balance (X-M=0)
A) Suppose a country experiences a government budget deficit, (G>T). What can we infer about the relationship between national savings (S) or investment (I)? Explain which is greater.
B) Now, suppose a country experiences a government budget surplus (G<T). Which is greater, national (S) or investment (I)? Explain.
I'm a bit confused about this question, help would be much appreciated.
The following macroeconomics equation describes an accounting identity (i.e. fact) relating national savings (S) to total investment (I), government spending (G), tax revenue (T), exports (X), and imports (M):
(S-I)= (G-T)+(X-M)
Assume a country has a net-zer trade balance (X-M=0)
A) Suppose a country experiences a government budget deficit, (G>T). What can we infer about the relationship between national savings (S) or investment (I)? Explain which is greater.
B) Now, suppose a country experiences a government budget surplus (G<T). Which is greater, national (S) or investment (I)? Explain.
Joshua StredderLv10
28 Sep 2019