Unformatted text preview: of production)… is it bad? No b/c it is financing investment • If borrowing is financing investments> generates economic growth, higher income> borrowing not a prob • If borrowing is financing consumption> higher interest payments> eventually consumption must be reduced Government Surplus/Deficit = T- G • If T>G has surplus, will lend to other sectors • If T<G has deficit, will borrow from other sectors Private Sector Surplus/Deficit = S- I • If S>I has surplus, will lend to other sectors • If S<I has deficit, will borrow from other sectors Net exports = Private Sector S/D + Gov Sector S/D • Y=C+I+G+X-M=C+S+I manipulate • X-M=S-I+T-G...
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- Spring '09
- International Trade, total net borrowing, investment abroad income, Gov Sector S/D, transfer Net Borrower