1. The national savings and investment identity helps us to understand a nations flow of trade (balance of trade) and capital flows. It helps us understand the trade balance. The national savings and investment identity is as follows: S + (M-X) = I + (G-T)

Question:

Please define all of the terms in the identity. Which side is the supply side of the identity and which is the demand side of the identity, and why? Why is M-X on the supply side of the equation and why is G-T on the demand side of the equation?

Answer rating: 100% (QA)

Defining the Terms S National Saving This represents the total income earned within a country minus consumption and government spending In other words ... View the full answer