Principles of Macroeconomics – Finance Saving and Investment (lecture 5.2)
National Savings
Y= C + I + G + X – M
Y – C – G = I + X – M
As S + T = Y – C
S + T – G = I + X + M, where S is private sector savings and T – G is government savings.
NS = I + X – M
With foreign savings:
X – M = KO – KI, where KO is capital outflow which is Australian savings moving overseas and KI
is capital inflow which is foreign savings moving into Australia.
If X < M then KO < KI, where the spending is greater than the savings, which Australia is as
Australia is a deflect account. Australia is relying on foreign savings. Australia will have faster
growth with foreign investment due to better technology and capital.
However, foreign countries expect a return, so are we better off? Both parties can benefit, thus being a
win-win situation.
This
preview
has intentionally blurred sections.
Sign up to view the full version.
The market for loanable funds
•
An increase in the expected profit in the future by firms will lend to greater
investment and a shift of the DLF curve.
•
As interest rate increases, the quantity of loanable funds decrease thus falls in
This is the end of the preview. Sign up
to
access the rest of the document.
This note was uploaded on 09/27/2011 for the course FINANCE 1001 taught by Professor Profassorted during the Three '11 term at University of Adelaide.
- Three '11
- ProfAssorted
- Finance
-
Click to edit the document details
