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Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985

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BuyFindarrow_forward

Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985
Textbook Problem

Explain the relationship among saving, investment, and net capital outflow.

To determine

Relationship between investment, saving, and net capital outflow.

Explanation

The relation of investment, saving, and net capital outflow is that saving is equal to investment plus net capital outflow. Derivation of this relationship is shown below.

Investment and saving are very crucial for long run economic growth. The Total economic output (Y) is the sum of consumption (C), investment (I), government purchase (G), and net export (NX). Symbolically, it can be shown as below.

Y=C+I+G+NX

The national saving is equal to the income of the national left after disbursing the consumption and government purchase

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