The following is a very simplified explanation of the Savings/Investment identity, ignoring imports, exports and government surpluses and deficits. It relies on equating two different ways of Gross Domestic Product: as Total Income and Total Spending. For a deeper explanation, search "Macroeconomics", "Gross Domestic Product" and "Supply and Demand for Loanable Funds".
Savings is just what people earn minus what they spend and what they pay in taxes. Lets call Savings (S), "what they earn" Income (Y), "what they spend" Consumption (C) and "what they pay in taxes" Taxes (T). So now:
S = Y - C - T (Equation 1)
Looking at the economy as a whole, the income of a nation (Y) is either spent by people (C), spent by government (G) or spent by businesses as investment (I). Now:
Y = C + G + I (Equation 2)
If we assume that the government doesn't spend more or less than it taxes, then G = T, or:
G - T = 0 (Equation 3)
Substituting the right side of Equation 2 into Equation 1, we have:
S = Y - C - T = (C + G + I) - C - T = I + (G - T) (Equation 4)
Finally, substituting the right side of Equation 3 into Equation 4, we have:
S = I + (G - T) = I + 0 = I.
Therefore, Savings = Investment.
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What is national expenditure?
It is the total expenditure for all kinds within the economy that is public and private. The national expenditure =Consumption+Investment+government purchases.
What is the most important lesson concerning the circular flow model?
Total income in the economy must always equal total spending. :)
How do you calculate nominal output?
Add all total expenditure in an economy at current prices, this includes government spending, consumption, investment and net exports.
Consequences of planned savings being greater than planned investment on income?
the economy will contract, total income and output decreases and may be the begining of a recession.
What is total investment of google?
1%
What is net domestic investment?
total investment less the amount of investment goods used up in producing the years output
Total capital investment for starting clothing boutique?
Total Liabilities, $90,000. Capital. Planned Investment. Owner Injection, $41,707.
The concept of net domestic investment refers to?
Total investment less the amout of investment goods used up in producing the year's output.
Calculate return on investment based on net income 192 mil and average total assets3090 mil?
net profit\total investment = ROI
How do you calculate the total investment in a load fund?
You can calculate the total investment in a load fund by adding up or taking the total summation of all the investments due by the end of the fiscal quarter.
How can I calculate the expected return on an investment?
To calculate the return on an investment you will fist write down the amount of your total investment including fees and any expenses. Next, write down your loss and finally calculate the return on investment by dividing the profit by total investment. www.moneychimp.com offers a compound interest calculator for your convenience.
How do you figure out return on investments?
(Amount received Or receivable - original investment) divided by original investment is the total return on investment. If ROI is to be calculated on annual basis, divide the total ROI by number of years. Express in terms of percentage.
Why does GDP equal to total expenditure?
GDP is the total output by an economy. if GDP increases, it will generate more ecnomic activity, more jobs and therefore increased wages for people. With these wages, people can increase their total expenditure. Total expenditure = consumer consumption + investment + government spending + net exports with more money from income, individuals will spend more on consumption and money which was saved in banks can be used to invest in firms. the taxes people pay will go to the government to spend. this will increase total expenditure. If GDP is low, then theres less acitivity in the economy, less jobs, less wages, less taxes, more government spending and a higher deficit and therefore total expenditure decreases.
Relationship between Aggregate output to aggregate income?
Aggregate Output is the total amount of output produced and supplied in the economy in a given period. Aggregate Income is the total amount of income received by all factors of production in an economy in a given period. If firms expect their sales to go up, they are likely to increase their investment so that they can increase production and meet consumer demand. Such an increase in investment raises the aggregate quantity of goods and services demanded at each price level; it increases aggregate demand.
What is the total collection of all your investment types referred to as?
Portfolio.
Which system involves total government control of a nation's economy?
command economy
What system involves total government control of a nation's economy?
command economy
Does the US and Mexico have anything in common with there economy?
Yes. Both countries are somewhat integrated on economic terms, specially on business and trade:From US point of view:Exports from US to Mexico: 8.3% of total (ranked 2nd)Imports from Mexico to US: 9.1% of total (ranked 3rd)Investment from Mexico: 0.3% of total (US$ 36.9 billion)From Mexican point of view:Exports from Mexico to US: 76.5% of total (ranked 1st)Imports from US to Mexico: 55.5% of total (ranked 1st)Investment from the US: 49.8% of total (US$ 11.6 billion)
What is Harrad domar model in economic development?
It is the idea that the economic growth is dependent on capital-output ratio (k, calculated as: Total output produced/total capital invested i.e. efficiency) and the saving ratio of the population. The assumptions it makes are: - Output is a function of capital stock - The marginal product of capital is constant. - Capital is necessary for output - The product of the savings rate and output equals saving which equals investment - The change in the capital stock equals investment minus the depreciation of the capital stock It states that Rate of growth of GDP = Savings ratio/ Capital output ratio.
When the economy is growing total output is and total income is?
both are increasing.
Why does income equal to total expenditure and also equal to GDP?
Because GDP, which stands for Gross Domestic Product, is the dollar value of total US production (of goods and services) within a given quarter. To measure how much we've produced, we keep track of how much has been bought in the economy. Another way to say this is that we keep track of how much each sector spends. Remember that GDP = C + I + G + NX, where C is consumption by households, I in investment (business spending), G is government is spending, and NX is net exports (exports minus imports). So this is how GDP is equal to total expenditure, expenditure being another word for spending. GDP is also equal to total income because every dollar that is spent is spent to pay someone. For example, if you buy an apple at a grocery store for a dollar, some of that dollar will go to the government, some to the employees of the store, some to the business owner as profit. Every time money changes hands (in a transaction) it is the income of someone (the one who received it) and the expenditure of someone else (the one who gave it). Some possible transactions are: You get paid: you receive income equal to the expenditure of your employer; You buy something: your expenditure is equal to the income of the shop selling you the item; GDP just totals up the amount of all these transactions and so is equal to the total income or total expenditure (as both are equal) in an economy..
How would an increase in total expenditures affect the nation's economy?
An increase in total expenditures affect the nation's economy would cause an expansion.
How do you calculate return on an investment?
A Return on Investment (ROI) is calculated to measure the performance of one investment relative to another. ROI is expressed as a percentage and is based on returns over an associated time period, usually one year. For example, a 25 percent annual ROI means that a $100 investment would return $25 in one year. Thus, after one year, the total investment becomes $125. Write down the amount of your total investment, including fees and expenses, if any. Write down the amount of profit or loss associated with your investment. Calculate the ROI by dividing the profit by the total investment. Many mutual fund websites provide with calculators to find the rate of returns according to the investment made. Reliance Mutual fund is one of the AMC that allows the user to calculate the rate of investment returns.
How do you calculate Return On Investment - ROI?
To calculate ROI, the benefit (or return of money or income gained) of an investment is divided by the cost of the investment. ROI is usually shown as a percentage. This formula can also be used to suit a number of different situations. Here is the formula for ROI: (Income from Investment - Cost of Investment) / Total Cost of Investment = ROI
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