Saving and investment.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 9, Problem 1.1P

To determine

Saving and investment.

Expert Solution & Answer

Explanation of Solution

Saving is that part of annual disposable income which is used by a consumer to be spent for future consumption. It can be formulized as [S=(Y−T)−C]. Investment is the value of planned plant purchases, equipment purchases and inventories purchase by business firms. Equilibrium occurs at the point when the Income equal to Aggregate expenditure which equals the sum of consumption, government spending and investment (Y=AE=C+I+G) which can only occur if the leakages from circular flow (Savings (S) and Taxes (T)) are exactly matched by injections of demand (Investment (I) and Government spending (G)) that is, (S+T=I+G). If the saving is greater than taxes and investment equals government spending, then, (S+T>I+G)

If leakages surpass injections, the aggregate expenditure would be lower than aggregate output (C+S+T≡Y>C+I+G) and as a result inventories will increase and the income (Y) will decline. Thus it will experience a recession.

If injections surpass leakages (G>T and S=I, S+T<I+G), the aggregate expenditure would be higher than aggregate output and as a result inventories will decrease and the income (Y) will increase.

Economics Concept Introduction

Saving: Saving is an income that is used by a consumer to spend for future consumption.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

How to calculate average variable cost?

When the economy consider a recession?

What are the 4 main parts of circular diagram?

Answer 2

Question

Chapter 9, Problem 1.1P

To determine

Saving and investment.

Expert Solution & Answer

Explanation of Solution

Saving is that part of annual disposable income which is used by a consumer to be spent for future consumption. It can be formulized as [S=(Y−T)−C]. Investment is the value of planned plant purchases, equipment purchases and inventories purchase by business firms. Equilibrium occurs at the point when the Income equal to Aggregate expenditure which equals the sum of consumption, government spending and investment (Y=AE=C+I+G) which can only occur if the leakages from circular flow (Savings (S) and Taxes (T)) are exactly matched by injections of demand (Investment (I) and Government spending (G)) that is, (S+T=I+G). If the saving is greater than taxes and investment equals government spending, then, (S+T>I+G)

If leakages surpass injections, the aggregate expenditure would be lower than aggregate output (C+S+T≡Y>C+I+G) and as a result inventories will increase and the income (Y) will decline. Thus it will experience a recession.

If injections surpass leakages (G>T and S=I, S+T<I+G), the aggregate expenditure would be higher than aggregate output and as a result inventories will decrease and the income (Y) will increase.

Economics Concept Introduction

Saving: Saving is an income that is used by a consumer to spend for future consumption.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 9, Problem 1.1P

To determine

Saving and investment.

Expert Solution & Answer

Explanation of Solution

Saving is that part of annual disposable income which is used by a consumer to be spent for future consumption. It can be formulized as [S=(Y−T)−C]. Investment is the value of planned plant purchases, equipment purchases and inventories purchase by business firms. Equilibrium occurs at the point when the Income equal to Aggregate expenditure which equals the sum of consumption, government spending and investment (Y=AE=C+I+G) which can only occur if the leakages from circular flow (Savings (S) and Taxes (T)) are exactly matched by injections of demand (Investment (I) and Government spending (G)) that is, (S+T=I+G). If the saving is greater than taxes and investment equals government spending, then, (S+T>I+G)

If leakages surpass injections, the aggregate expenditure would be lower than aggregate output (C+S+T≡Y>C+I+G) and as a result inventories will increase and the income (Y) will decline. Thus it will experience a recession.

If injections surpass leakages (G>T and S=I, S+T<I+G), the aggregate expenditure would be higher than aggregate output and as a result inventories will decrease and the income (Y) will increase.

Economics Concept Introduction

Saving: Saving is an income that is used by a consumer to spend for future consumption.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 9, Problem 1.1P

To determine

Saving and investment.

Expert Solution & Answer

Explanation of Solution

Saving is that part of annual disposable income which is used by a consumer to be spent for future consumption. It can be formulized as [S=(Y−T)−C]. Investment is the value of planned plant purchases, equipment purchases and inventories purchase by business firms. Equilibrium occurs at the point when the Income equal to Aggregate expenditure which equals the sum of consumption, government spending and investment (Y=AE=C+I+G) which can only occur if the leakages from circular flow (Savings (S) and Taxes (T)) are exactly matched by injections of demand (Investment (I) and Government spending (G)) that is, (S+T=I+G). If the saving is greater than taxes and investment equals government spending, then, (S+T>I+G)

If leakages surpass injections, the aggregate expenditure would be lower than aggregate output (C+S+T≡Y>C+I+G) and as a result inventories will increase and the income (Y) will decline. Thus it will experience a recession.

If injections surpass leakages (G>T and S=I, S+T<I+G), the aggregate expenditure would be higher than aggregate output and as a result inventories will decrease and the income (Y) will increase.

Economics Concept Introduction

Saving: Saving is an income that is used by a consumer to spend for future consumption.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 9, Problem 1.1P

To determine

Saving and investment.

Expert Solution & Answer

Explanation of Solution

Saving is that part of annual disposable income which is used by a consumer to be spent for future consumption. It can be formulized as [S=(Y−T)−C]. Investment is the value of planned plant purchases, equipment purchases and inventories purchase by business firms. Equilibrium occurs at the point when the Income equal to Aggregate expenditure which equals the sum of consumption, government spending and investment (Y=AE=C+I+G) which can only occur if the leakages from circular flow (Savings (S) and Taxes (T)) are exactly matched by injections of demand (Investment (I) and Government spending (G)) that is, (S+T=I+G). If the saving is greater than taxes and investment equals government spending, then, (S+T>I+G)

If leakages surpass injections, the aggregate expenditure would be lower than aggregate output (C+S+T≡Y>C+I+G) and as a result inventories will increase and the income (Y) will decline. Thus it will experience a recession.

If injections surpass leakages (G>T and S=I, S+T<I+G), the aggregate expenditure would be higher than aggregate output and as a result inventories will decrease and the income (Y) will increase.

Economics Concept Introduction

Saving: Saving is an income that is used by a consumer to spend for future consumption.

Answer 6

Chapter 9, Problem 1.1P

To determine

Saving and investment.

Expert Solution & Answer

Explanation of Solution

Saving is that part of annual disposable income which is used by a consumer to be spent for future consumption. It can be formulized as [S=(Y−T)−C]. Investment is the value of planned plant purchases, equipment purchases and inventories purchase by business firms. Equilibrium occurs at the point when the Income equal to Aggregate expenditure which equals the sum of consumption, government spending and investment (Y=AE=C+I+G) which can only occur if the leakages from circular flow (Savings (S) and Taxes (T)) are exactly matched by injections of demand (Investment (I) and Government spending (G)) that is, (S+T=I+G). If the saving is greater than taxes and investment equals government spending, then, (S+T>I+G)

If leakages surpass injections, the aggregate expenditure would be lower than aggregate output (C+S+T≡Y>C+I+G) and as a result inventories will increase and the income (Y) will decline. Thus it will experience a recession.

If injections surpass leakages (G>T and S=I, S+T<I+G), the aggregate expenditure would be higher than aggregate output and as a result inventories will decrease and the income (Y) will increase.

Economics Concept Introduction

Saving: Saving is an income that is used by a consumer to spend for future consumption.

Answer 7

Chapter 9, Problem 1.1P

To determine

Saving and investment.

Answer 8

Expert Solution & Answer

Explanation of Solution

Saving is that part of annual disposable income which is used by a consumer to be spent for future consumption. It can be formulized as [S=(Y−T)−C]. Investment is the value of planned plant purchases, equipment purchases and inventories purchase by business firms. Equilibrium occurs at the point when the Income equal to Aggregate expenditure which equals the sum of consumption, government spending and investment (Y=AE=C+I+G) which can only occur if the leakages from circular flow (Savings (S) and Taxes (T)) are exactly matched by injections of demand (Investment (I) and Government spending (G)) that is, (S+T=I+G). If the saving is greater than taxes and investment equals government spending, then, (S+T>I+G)

If leakages surpass injections, the aggregate expenditure would be lower than aggregate output (C+S+T≡Y>C+I+G) and as a result inventories will increase and the income (Y) will decline. Thus it will experience a recession.

If injections surpass leakages (G>T and S=I, S+T<I+G), the aggregate expenditure would be higher than aggregate output and as a result inventories will decrease and the income (Y) will increase.