E Explain the fundamental relationship among saving, investment, the fiscal balance, and trade balance

Question 1

S = I + (G-T); fiscal balance (dif. between gov. spend and gov. receipts) + (X- M); trade balance;net exports

Answer 1

This equation shows that private savings must = private investment + gov borrowing or -Gov savings, and -trade deficit or +trade surplus

+(G-T);Gov deficit
-(G-T); Gov Surplus

Question 2

(G-T)=(S-I)-(X-M)

Answer 2

A gov deficit (G-T>0) must be financed by some combo of a trade deficit (0>X-M) or an excess of private saving over private investment (S-I>0)

Question 3

(G-T)=(S-I)-(X-M)

Answer 3

A gov deficit (G-T>0) must be financed by some combo of a trade deficit (0>X-M) or an excess of private sacing over private investment (S-I>0)