How a well-functioning financial system increases savings and investment spending. Concept Introduction: Financial System: It is a system where all the borrowers and lenders exchange their financial assets. Investment Spending: All those spending which are done on physical capital which means that only expenses that increase economy level of physical capital is known as investment spending. The formula to calculate investment spending is: Here, I is investment spending. GDP is gross domestic product . C is consumption spending. G is government spending. Budget Balance: The budget is considered to be balanced when revenue collected from tax and expenditures made by government are equal. When it is deficit it is represented by negative value, when it is surplus it is represented by positive value and in case of balanced budget it is zero. Net Capital Inflow: It is the total amount of incoming of all the financial assets into a country which is then deducted from the total outgoing of financial assets out of a country.

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Chapter 25, Problem 13P

To determine

How a well-functioning financial system increases savings and investment spending.

Concept Introduction:

Financial System: It is a system where all the borrowers and lenders exchange their financial assets.

Investment Spending: All those spending which are done on physical capital which means that only expenses that increase economy level of physical capital is known as investment spending.

The formula to calculate investment spending is:

Here,

I is investment spending.

GDP is gross domestic product.

C is consumption spending.

G is government spending.

Budget Balance: The budget is considered to be balanced when revenue collected from tax and expenditures made by government are equal. When it is deficit it is represented by negative value, when it is surplus it is represented by positive value and in case of balanced budget it is zero.

Net Capital Inflow: It is the total amount of incoming of all the financial assets into a country which is then deducted from the total outgoing of financial assets out of a country.

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