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Saving and investment identity

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Saving and Investment Identity: (Open Economy)

As discussed in the class, total national saving equals to total investment spending in a closed economy. Now, let's replicate the work in the class and investigate what does total investment spending define in an open economy.

Given:

= + + +

= -

= +

a. Define total investment spending (I) in terms of total national saving and other variable in the equation. 

b. What is the result in the previous question suggest? Instead of national saving, what other factors also contribute to the investment spending in an open economy?

Reference no: EM132506606

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