Econ 100b Lecture 4

Econ 100b Lecture 4 - Econ 100b Lecture 4 Saving = current...

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Econ 100b Lecture 4 Saving = current income – current spending National saving consists of private saving [Ssubp] and government saving [Ssubg] Saving is a flow variable Private saving, Ssubp is given by Sp = Y – T - C Y-T is the disposable income Government saving is given by Sg = T-G which is approximately = T – G T: net taxes G: total government purchases Government saving also reflects the government’s budget balance If government spending is positive budget surplus and vice versa budget deficit National saving, S S = Y – C – G The uses of Saving Identity starts with 1. National income: Y = C + I + G + Nx 2. National saving: S = Y – C – G S = I + Nx National saving is used in two ways o 1. To finance investment o 2. To finance net export surpluses o We’re either going to spend the money domestically by investing it or send it abroad S – I = Nx : this is the net capital outflow identity
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Econ 100b Lecture 4 - Econ 100b Lecture 4 Saving = current...

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