Principles of Macroeconomics – Finance saving and investment (lecture 5.2)

Principles of Macroeconomics – Finance saving and investment (lecture 5.2)

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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.
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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
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Principles of Macroeconomics &acirc;€“ Finance saving and investment (lecture 5.2)

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