Handout 3g - Handout 3g Saving and Investment II Spring...

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Spring 2007 The following table shows private saving and public saving for the U.S. and the Euro area in 1970 to the present. In this handout, you will use you the open-economy saving-investment diagram of chapter 11 to examine the trends in U.S. and European saving and investment. U.S. Euro Area Year National Saving Net Exports Net Capital Inflows National Saving Net Exports Net Capital Inflows (% of GDP) (% of GDP) (% of GDP) (% of GDP) (% of GDP) (% of GDP) 1970 19.5 0.4 28.3 -0.6 1980 21.8 -0.5 21.5 -3.6 2004 13.5 -4.8 21.6 2.1 a. In the table above, calculate the net capital inflows for the U.S. and the Euro area. b. In the space provided below, draw the open-economy saving-investment diagram for the U.S. and for the Euro area in 1980. First, draw an investment curve I 1980 for each country Second, draw a national saving curve S 1980 for each country. Third, add or subtract net capital inflows KI 1980 to national saving S 1980 so you get a total saving TS 1980 = KI 1980 + S 1980 curve for each country. Page 1 of 2
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Handout 3g - Handout 3g Saving and Investment II Spring...

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