Needs Graph for this question In the context of the national savings and investment identity, briefly...
Needs Graph for this question
In the context of the national savings and investment identity, briefly describe the main sources for both the supply of and demand for capital in the U.S. economy. There are two main sources for the supply of capital in the U.S. economy: saving by individuals and firms, called S, and the inflow of financial capital from foreign investors, which is equal to the trade deficit M – X, or imports minus exports. There are two main sources of demand for financial capital in the U.S. economy: private sector investment, I, and government borrowing, where the government needs to borrow when government spending, G, is higher than the taxes collected, T.
Homework Answers
So, sources of supply of capital: S + (M-X) = Sources of Demand
for Capital, I + (G-T),
we can re-arrange the same as: I + G + X (exogenous and not
dependent on income) = S + M + T
Let me know if you need more help with this!
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In the context of the national savings and investment identity,
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