Description
What is the relationship between a country's savings, its government budget deficit, its domestic investment in physical capital,and its foreign investment?
Explanation & Answer
Thank you for the opportunity to help you with your question!
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.
Please let me know if you need any clarification. I'm always happy to answer your questions.Review
Review
24/7 Homework Help
Stuck on a homework question? Our verified tutors can answer all questions, from basic math to advanced rocket science!
Similar Content
Related Tags
Night
by Elie Wiesel
The Russian Hoax
by Gregg Jarrett
The Woman in the Window
by A. J. Finn
The Knife of Never Letting Go
by Patrick Ness
Too Much and Never Enough
by Mary L. Trump
Becoming
by Michelle Obama
The Da Vinci Code
by Dan Brown
Treasure Island
by Robert Louis
Killers of the Flower Moon
by David Grann