Saving and net flows of capital and goods In a closed economy, saving and investment must be equal, but this is not the case in an open economy. In the following problem, you will explore how saving and investment are connected to the international flow of capital and goods in an economy. Before delving into the relationship between these various components of an economy, you will be asked to recall some relationships between aggregate variables that will be useful in your analysis
Recall the components that make up GDP. National income (Y) equals total expenditure on the economy's output of goods and services. Thus, where C consumption, I investment, G government purchases, X exports, M imports, and NX net exports: Y
Also, national saving is the income of the nation that is left after paying for Therefore, national saving (S) is defined as:
S
Rearranging the previous equation and solving for Y yields Y Plugging this into the original equation showing the various components of GDP results in the following relationship:
S
since net exports must equal net capital outflow (NCO, also known as net foreign investment) This is equivalent to S-
Now suppose that a country is experiencing a trade surplus. Determine the relationships between the entries in the following table, and enter these relationships using the following symbols: > (greater than), < (less than), or (equal to)
Outcomes of a Trade Surplus
Exports Imports
Net Exports 0
C+IG Y
Saving Investment C
0 Net Capital Outflow
Answers: 1
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Carrie works at a canned food production factory. the government wanted to give a boost to the salt industry, so it lined up numerous subsidies and tax exemptions for the sector. this lead to a decrease in production costs. this also meant that consumers could access canned foods at a lower price, which lead to an increase in demand for the product. which kind of economic system is carrie’s company dealing with? carrie’s company is dealing with a/an economy.
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Salge inc. bases its manufacturing overhead budget on budgeted direct labor-hours. the variable overhead rate is $8.10 per direct labor-hour. the company's budgeted fixed manufacturing overhead is $74,730 per month, which includes depreciation of $20,670. all other fixed manufacturing overhead costs represent current cash flows. the direct labor budget indicates that 5,300 direct labor-hours will be required in september. the company recomputes its predetermined overhead rate every month. the predetermined overhead rate for september should be:
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Saving and net flows of capital and goods In a closed economy, saving and investment must be equal,...
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