Lesson_48_Twin Deficits

Lesson_48_Twin Deficits - Twin Deficits U.S. current...

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1 Lesson 48 1 Twin Deficits U.S. current account has persistently large deficits What is the cause? Introduce national income accounting to explore possible causes of current account deficit Lesson 48 2 Review national income accounting Let Y represent GDP (the value of all final goods and services produced within a country’s borders over some period of time) Can divide up total production according to the kinds of goods produced Lesson 48 3 Three kinds of goods Consumption ( C ), Investment ( I ) and Government ( G ) Consumption goods include food, clothing, entertainment, electricity, home theater systems…
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2 Lesson 48 4 Investment goods are the things that firms use to generate future production These goods include tools, buildings, and inventories Finally, government goods include everything that the government (federal, state, local) buys Lesson 48 5 All three categories are measured in dollar value Can add them all up YCIG =++ But that’s not quite right Lesson 48 6 Some goods that are produced in the United States are exported….they do not show up in C , I , or G We have to add them in: YCIGE X =+++ Still not quite right
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This note was uploaded on 09/14/2009 for the course ECON 340 taught by Professor Leidholm during the Summer '08 term at Michigan State University.

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Lesson_48_Twin Deficits - Twin Deficits U.S. current...

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