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Unformatted text preview: Since trade surplus is equal to the domestic (total of public and private) savings minus investment, China's trade surplus as percentage of GDP must have declined. Hadi Salehi Esfahani Solution to Quick Quiz 4! 2. Assume that over the past few years the total saving in the rest of the world has remained unchanged relative to Chinas GDP. What must have happened to the total investment in the rest of the world relative to Chinese GDP? Recall that Domestic Savings + Foreign Savings = I . Since Chinas trade surplus has been declining, the rest of the world has had less foreign savings relative to Chinese GDP. Given that the total domestic savings in the rest of the world have been constant relative to Chinas GDP, total savings available for investment in the rest of the world must have been declining relative to Chinas GDP. Hence, investment in the rest of the world must have...
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This note was uploaded on 01/27/2012 for the course ECON 509 taught by Professor Villamil during the Fall '08 term at University of Illinois, Urbana Champaign.
- Fall '08