2 Nov 2021
Problem 12
Page 574
Section SELF: CHECK QUESTIONS
Chapter 23: The International Trade and Capital Flows
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2 Nov 2021
Introduction
The national savings and investments pattern teaches everyone that a country's unique proportions of domestic consumption and investment dictate its trade balance. one needs to r Reorganize the identification to bring the trade balance on one side of the equation by itself to grasp this concept. Consider a situation in which there is a trade deficit first, and then one in which there is a budget surplus.
The national saving and investment identities can be reformulated as follows in the event of a deficit:
Trade deficit = (M – X) = I – S – (T – G)
= Domestic investments – Private domestic saving – Governmental (or public) reserves
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