Point based on double entry book keeping based

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

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...
View Full Document

Ask a homework question - tutors are online