Economics 2152A/B Lecture Notes - Price Level, Gdp Deflator, Production Function
15 Nov 2012
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Spvt = i - sgovt + ca (equation 1) Equation 1 implies that an economy"s private saving can be used in three ways: If ca < 0, means borrowing from foreigners, by selling to them some of our assets. 12 + 3 = 10 + 5 lending to foreigners. 12 3 = 10 -1 borrowing from foreigners. 12 3 = 12 -3 borrowing from foreigners. 12 +0 = 12 + 0 government"s budget is balanced, t = tr + int + g. ca = nx + nfp, borrowing can still have taken place, it just has to equal net exports, or vice versa. Nominal variables are measured in terms of current market values, qt * pt nominal output at time t (at current dollar) Changes in nominal variable can be broken down into changes in quantity and changes in price, that is why economists use real variables.
