Mych02b - Chapter 2 (Continued) Saving and Wealth, once...

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Chapter 2 (Continued) Saving and Wealth, once more Textbook says low US personal saving is not much to worry Measures of aggregate saving Saving = current income – current spending Saving rate = saving/current income = (current income – current spending)/ current 1
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or, s = 1 – Expenditure/Y and ds/dY > 0 Upward revaluation of income increases saving rate Private saving is more important than personal saving. Private saving = private disposable income – 2
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Chapter 2 (Continued) People save for the purpose of increasing their wealth During a period of capital gain, they save little. In fact, there is the flip side: in the current Great Recession, American saving goes up 3
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Real GDP, Inflation and Price indices To avoid the distortion of price changes, one seeks GDP in ‘real’ terms Nominal GDP Current Dollar GDP = Σ i q i (t) p i (t). Real GDP Constant Dollar GDP = Σ i q i (t) p i (0). Base year = ‘year 0’ GDP deflator = 100 x (Nominal GDP/Real GDP) which is a price index, using current output as weights.
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Mych02b - Chapter 2 (Continued) Saving and Wealth, once...

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