ECON-002 Lecture Notes - Government Budget Balance, Loanable Funds, Financial Capital

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classnotes

28 May 2022

School

Georgetown University

Department

Economics

Course

ECON-002

Professor

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Document Summary

According to the savings investment spending identity, savings and investment spending are always equal for the economy as a whole. I = snational = sgovernment(budget balance) + sprivate + net exports. National savings = government savings + private savings. I = gdp c g x + im. Budget surplus = tax revenue - government spending. Budget deficit = tax revenue - government spending. The budget balance = tax revenue - government spending. Government borrowing is the total amount of funds borrowed by federal, state, and local governments in the financial markets. National savings = private savings + government savings/budget balance. Is the total amount of savings generated within the economy. Consists of manufactured resources, such as buildings and machines. Is the improvement in the labor force generated by education and knowledge. Is funds from savings that are available for investment spending. Net capital inflow = inflow of funds - outflow of funds.

Related Questions

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.

carminedolphin386

What are the relationships between current account deficit (CAD), budget deficit and national debt, knowing that the US national debt is currently at $21.13 trillion? Note the following GDP equation and identities: I = Sp + (T - G) + (Im - Ex). I=Investment; Sp=private savings; T-G = public savings, tax revenue minus government spending, which could be a budget deficit if G>T; Im-Ex = imports minus exports, which could lead to current account deficit if Im>Ex leading to NCI (net capital inflow).