Chapter 13 - Savings,Investment Spending, Financial System - Ch9

Chapter 13 - Savings,Investment Spending, Financial System - Ch9

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Savings, Investment Spending, and the Financial System
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Savings & Investment Savings-Investment Spending Identity: Savings and investment spending are always equal for the economy as a whole. Budget Surplus: Government spends less than it collects in taxes. Budget Deficit: Government spends more than it collects in taxes.
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Savings & Investment Budget Balance: The difference between tax revenue and government spending. National Savings: The sum of private savings plus the budget balance (public savings), is the total amount of savings generated within the economy.
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Closed Economy GDP = C + I + G S Private = GDP + TR T C S Government = T TR G NS = S Private + S Government = (GDP + TR T C ) + ( T TR G ) = GDP C G I = NS Investment Spending = National Savings in a closed economy
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Budget Surplus
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Budget Deficit
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Open Economy GDP = C + I + G + NX Capital Inflow (KI) = - NX = (IM X) I = S Private + S Government + (IM X) = NS + KI I = NS + KI Investment Spending = National Savings + Capital Inflow in an open economy
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Open Economy: U.S. 2003
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Open Economy: Japan 2003
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Market for Loanable Funds L oanable Funds Market: Hypothetical model that examines the market outcome of the demand for funds generated by borrowers and the supply of funds provided by lenders. The interest rate is the price, calculated as a percentage of the amount borrowed, charged by the lender to a borrower for the use of their savings for one year.
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Market for Loanable Funds The rate of return of a project is the profit earned on the project expressed as a percentage of its cost.
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Demand for Loanable Funds
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Supply of Loanable Funds
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Equilibrium in Loanable Funds
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