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Augmented Saving
An alternative way of determining equilibrium GDP is to find the level of income where the sum of desired injections equals the sum of desired leakages. Desired injections include Investment (I), Government Spending (G), and Exports (X). Leakages include Saving (S), Taxes (T), and Imports (M). Thus, the condition for equilibrium is: S + T + M = I + G + XSubtracting G and M from both side of the above equation gives S + (T - G) = I + (X - M)This equation can be interpreted as a generalization of the condition that saving equals investment, since it says that national saving equals asset formation.What happens when desired national assets formation exceeds desired national saving? Firms will respond to the imbalance by producing more, moving the economy towards equilibrium.What happens when desired national saving is more than desired national asset formation?Firms will cut back on output in order to avoid accumulating excess inventories, and the economy will move towards equilibrium.
Importance of macroeconomics models Using the models we can, for example, analyze what happens when the government increases consumption, when the central bank increases the tar
Illustrate the about term the open economy in short. The Open Economy: a. A closed economy is an economy which does not trade goods-services as well as assets. b. The Uni
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While referring to the "EYE on YOUR LIFE" section on page 183 of the textbook, apply this concept to your life. Develop your own policy position on price floors and price ceilings.
Q. What do you mean by multiplier effect? Loans and deposits in banks give rise to a significant multiplier effect. We use a simple instance to explain this effect. Consider th
i need help comparing real values in the base year dollars
how do i calculate how much the gorverment should spend if the MPC is 0.8 and 200million is requered to reach full employment ?
Q. Consumption function in the IS-LM model? The consumption function will be the same as in cross model, consumption will depend positively on Y. In the classical model, consum
Explain about the elasticity and total revenue. Elasticity and Total Revenue: a. When demand for a good is elastic, a raise in price decreases total revenue. Then Sales effe
Which of the following is a result of an export subsidy? a. The imposing nation always benefits from an export subsidy. b. The imposing nation suffers a terms of trade loss from an
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