ECON 202 Lecture 4: Chap4-Spring2016
7 Jul 2016
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Chapter 4: saving and investment in closed and open economies. Private saving equals private disposable income minus consumption expenditure. Yd = y t where y = gdp, T = net taxes (i. e. , taxes government transfers interest payments on debt) Private saving: sp = y t c where c = consumption expenditure. Private saving rate is the proportion of private disposable income that is saved: Government saving: government purchases (g) consist of: S = y c g: national saving rate: s / y. Policy and practice: government policies to stimulate saving: governments stimulate saving through: S = (c + i + g + nx) c g. = i + nx: or as the net capital outflow identity: Net capital outflow = trade balance: a trade surplus occurs if nx>0, a trade deficit occurs if nx<0. The link between saving and wealth: the uses-of-saving and net capital outflow identities show that: Saving can either finance investment or net exports.
