Need help with a homework on economics on chapter 14

Economics
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What is the relationship between a country's savings, its government budget deficit, its domestic investment in physical capital,and its foreign investment?

Nov 23rd, 2015

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A country's national saving is the total of its domestic savings by households and companies(private savings) as well as the government savings(public savings) . If a country is running a trade deficit , it means money from abroad is entering in the country and is considered as part of supply of financial capital.The demand for financial capital (money) represents groups that are borrowing the money .Business need to borrow to finance their investment in factories, materials, and personnel.When the federal government runs a budget deficit , it is also borrowing from investors by selling Treasury bonds. So both business investments and federal government can demand the supply of savings..The national saving and investment identity provides a useful way to understand the determinants of the trade and current account balance.

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Nov 23rd, 2015

In cont...

Supply of financial capital=Demand for capital

S+(M-X)=I+ (G-T)

Where...

S=private savings

T=taxes

G=government spending

M=imports

X=exports

I=investments

Nov 23rd, 2015

In cont...

Supply of financial capital=Demand for capital

S+(M-X)=I+ (G-T)

Where...

S=private savings

T=taxes

G=government spending

M=imports

X=exports

I=investments

Nov 23rd, 2015

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Nov 23rd, 2015
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Nov 23rd, 2015
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