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Index - Index = 100 x(Year X/Base Year SOE r*

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€ Index = 100 x (Year X €/Base Year €) Inflation Rate = ∆€ Index/€ (t-1) t-time Cobb-Doug = AK^0.3L^0.7 GDP=Y=C+I+G+NX Sp=Y-T-C Sg=T-G S=Y-C-G Savings-Investment=Net Exports (trade balance) NX>0 trade surplus, NX<0 trade deficit Higher Savings- tax consumption, increase incentives to save, increase return on savings, reduce deficits-- as RIR +, households save more, desired savings increases since earns higher return Savings curve: +govt expenditures/-taxes = -national savings = shift saving left +optimism = +autonomous consumption = +overall consump = shift saving left Investment curve: +business optimism=+desired investment= shift invest right, higher RIR SOE- r*<rw – trade surplus, r*>rw- trade deficit, r*=rw-trade balance, increase in world savings or decrease in world investment makes domestic RIR fall, investment rise, and net exports to fall. Increase in saving in the SOE makes higher trade balance, increase in net capital outflows, vice versa.
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