ECON 102 1st Edition Lecture 19 Outline of Last Lecture 1 Differing Growth Rates a Factors 2 Role of Government Policies a Role of Policies Outline of Current Lecture I Terminology II Savings Investment Spending Identity a Simplified Economy b Open Economy Current Lecture Terminology According to the savings investment spending identity savings and investment spending are always equal for the economy to be whole o G Government o T Taxes o TR Transfers The budget surplus is the difference between tax revenue and government spending when tax revenue exceeds government spending o BS Budget Surplus BS T G TR 0 The budget deficit is the difference between tax revenue and government spending when government spending exceeds tax revenue o BD Budget Deficit BD T G TR 0 The budget balance is the difference between tax revenue and government spending o BB Budget Balance BB T G TR 0 National savings the sum of private savings plus the budget balance is the total amount of savings generated within the economy Capital Inflow The movement of capital into a market or economy from services rendered abroad These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute Savings Investment Spending Identity In a simplified economy 1 Total Income Total Spending 2 Total Income Consumption spending spending o Meanwhile spending consists of either consumption spending or investment spending 3 Total Spending Consumption spending Investment spending o Putting these together we get 4 Consumption spending Savings Consumption spending Investment Because this equation is equal the Consumption spending gets cancelled out so Savings Investment Spending In a simplified economy o GDP C I G o SPrivate GDP TR T C o SGovernment T TR G o National Savings SPrivate SGovernment In a closed economy o Investment spending National savings In an open economy o Investment spending National savings Capital inflow Inflows Outflows IM X imports exports o I SPrivate SGoverment IM X NS KI The loanable funds market is a hypothetical market that examines the market outcome of the demand for funds generated by borrowers and the supply of funds provided
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