National savings
Encyclopedia
In economics
, a country's national savings is the sum of private and public savings. It is generally equal to a nation's income minus consumption and government purchases.
, (the goods and services it produces in a year). If Y is national income (GDP), then the three uses of C consumption
, I investment
, and G government purchases can be expressed as:
National savings can be thought of as the amount of remaining money that is not consumed, or spent by government. In a simple model of a closed economy, anything that is not spent is assumed to be invested
:
National savings should be split into private savings and public savings. A new term, T is taxes paid by consumers that goes directly to the government as shown here:
With (Y - T) being disposable income (Y - T) less consumption (C) is private savings. The term (T - G) is government revenue though taxes minus government expenditures which is public savings, also known as the Budget surplus.
The interest rate plays the important role of creating an equilibrium between saving and investment.
In open economy
model
NX = Net Exports = eXports - iMports
NX = (X-M)
NX=Y-(C+I+G)=Y-Domestic demand
Y=C+I+G+NX
Y-C-G=National savings (S)=I+NX
S=I+NX
S-I=NX
S-I=The portion of investment not financed by national savings=
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
, a country's national savings is the sum of private and public savings. It is generally equal to a nation's income minus consumption and government purchases.
Economic model of national savings
In this simple economic closed economy model there are three uses for GDPGross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
, (the goods and services it produces in a year). If Y is national income (GDP), then the three uses of C consumption
Consumption (economics)
Consumption is a common concept in economics, and gives rise to derived concepts such as consumer debt. Generally, consumption is defined in part by comparison to production. But the precise definition can vary because different schools of economists define production quite differently...
, I investment
Investment
Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...
, and G government purchases can be expressed as:
National savings can be thought of as the amount of remaining money that is not consumed, or spent by government. In a simple model of a closed economy, anything that is not spent is assumed to be invested
Investment
Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...
:
National savings should be split into private savings and public savings. A new term, T is taxes paid by consumers that goes directly to the government as shown here:
With (Y - T) being disposable income (Y - T) less consumption (C) is private savings. The term (T - G) is government revenue though taxes minus government expenditures which is public savings, also known as the Budget surplus.
The interest rate plays the important role of creating an equilibrium between saving and investment.
In open economy
Open economy
An open economy is an economy in which there are economic activities between domestic community and outside, e.g. people, including businesses, can trade in goods and services with other people and businesses in the international community, and flow of funds as investment across the border...
model
NX = Net Exports = eXports - iMports
NX = (X-M)
NX=Y-(C+I+G)=Y-Domestic demand
Y=C+I+G+NX
Y-C-G=National savings (S)=I+NX
S=I+NX
S-I=NX
S-I=The portion of investment not financed by national savings=