Point based on double entry book keeping based

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Unformatted text preview: point Based on Double Entry Book-Keeping Based Principle. Principle. Credit is equal to Credit Debit Income = Expenditure. Debit Y=C+S+T Combining the equation No. (1) & Combining equation No. (2) equation Cp + Cg + Ip + Ig + X = Cp + Sp + T + IM Some manipulation leads us to fundamental accounting identity in BOP accounting: accounting (Ip - Sp) + Ig - (T – Cg) = IM – X - (3) Expression IM – X = Current Account Deficit ( CAD ) Current Equation 3 indicates that CAD is Equation equal to the excess of investment over saving (IP – SP) and the fiscal deficit Ig – (T – Cg) deficit If TC renamed as Sg (Government If Saving) Saving) (Ip - Sp) + (Ig – Sg) = IM – X Such decomposition of CAD yields Such insights into the causes of trade deficit or current account deficit. deficit...
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