The national income identity in an open economy Y-C+I+G+NX or,NX=Y-(C+I+G) domestic net exports spending output CHAPTER8 The Open Economy slide 7
CHAPTER 8 The Open Economy slide 7 The national income identity in an open economy Y = C + I + G + NX or, NX = Y – (C + I + G) net exports domestic spending output 1
1 International capital flows ■Net capital outflows S-I net outflow(资本净流出)of"loanable funds'”(可贷资金) net purchases of foreign assets the country's purchases of foreign assets minus foreign purchases of domestic assets When S >I,country is a net lender When S <I,country is a net borrower CHAPTER8 The Open Economy slide 8
CHAPTER 8 The Open Economy slide 8 International capital flows ▪ Net capital outflows = S – I = net outflow(资本净流出)of “loanable funds”(可贷资金) = net purchases of foreign assets the country’s purchases of foreign assets minus foreign purchases of domestic assets ▪ When S > I, country is a net lender ▪ When S < I, country is a net borrower 1
1 Another important identity NX=Y-(C+I+G) implies NX=(Y-C-G)-I 三 S trade balance net capital outflows -spending need not equal output -saving need not equal investment Return CHAPTER8 The Open Economy slide 9
CHAPTER 8 The Open Economy slide 9 Another important identity NX = Y – (C + I + G ) implies NX = (Y – C – G ) – I = S – I trade balance = net capital outflows ▪spending need not equal output ▪saving need not equal investment 1 Return
2.1 Saving and Investment in a Small Open Economy An open-economy version of the loanable funds model from chapter 3. -Includes many of the same elements: production function:Y=Y=F(K,L) consumption function:C=C(Y-T) investment function: I=I(r) exogenous policy variables:G=G,T=T CHAPTER8 The Open Economy slide 10
CHAPTER 8 The Open Economy slide 10 Saving and Investment in a Small Open Economy ▪ An open-economy version of the loanable funds model from chapter 3. ▪ Includes many of the same elements: production function: ( , ) Y Y F K L = = consumption function: ( ) C C Y T = − investment function: ( ) I I r = exogenous policy variables: , G G T T = = 2.1
2.1 National Saving: The Supply of Loanable Funds 5=Y-CY-)-G As in Chapter 3, national saving does not depend on the interest rate S SI CHAPTER 8 The Open Economy slide 11
CHAPTER 8 The Open Economy slide 11 National Saving: The Supply of Loanable Funds r S, I As in Chapter 3, national saving does not depend on the interest rate S Y C Y T G = − − − ( ) S 2.1