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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.
Once we have monthly data on a price index we can evaluate the inflation. In most nations, the percentage change in price index during one month is small. Hence it is more common t
What is Monetary base The monetary base is defined as the total value of all currency (banknotes and coins) outside the central bank and commercial banks' (net) reserves with t
WHAT IT MEAN
Steps to real wage rates to fall Wage 'stickiness' or wage inflexibility may stop the real wage rate falling to the full-employment wage rate. Stickiness or inflexibility is ca
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