Explain augmented saving, Macroeconomics

Assignment Help:

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 + X

Subtracting 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.

 


Related Discussions:- Explain augmented saving

What are the two types of money, What are the Two types of money In mos...

What are the Two types of money In most countries, one can identify two "types of money": Currency and coins Bank deposits Total value of all the money in a

Gold standard after world war i, Did Germany ever go back on the Gold Stand...

Did Germany ever go back on the Gold Standard after World War I and prior to World War II? If so, what were the economic and political effects of doing so? I know it was on the Gol

Initial equilibrium position, Determine on any market the effect of the fol...

Determine on any market the effect of the following. Do each separately (on a separate graph) starting from an initial equilibrium position for each one. 1. increase in income

Implement sap to improve processes, Explain how a Fortune 500 company has b...

Explain how a Fortune 500 company has been able to implement SAP to improve their processes. Suppose the supply function for product X is given by Qsx = -50 + 0.5Px - 5Pz. A.

Determine the exchange rate, Q. Determine the Exchange rate? Exchange r...

Q. Determine the Exchange rate? Exchange rate is determined by the ratio of domestic price level to the foreign price level. If, for instance domestic prices increase by 10% wh

Comparative advantage in cars and in rice, Suppose that in the United State...

Suppose that in the United States a car can be produced with 200 labor hours, while a ton of rice requires 20 labor hours. In Japan, it takes 150 labor hours to make a car and 50 l

International trade, factor contribute long run trend of term of trade in d...

factor contribute long run trend of term of trade in developing country

Benefits in a perfectly competitive market, "Nearly all critics agree that ...

"Nearly all critics agree that consumers have the most benefits in a perfectly competitive market." Does the above statement apply to microeconomics or macroeconomics? Why? Think a

Gross domestic production, why is imports subtracted from the expenditure a...

why is imports subtracted from the expenditure approach

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd