A simple Keynesian open economy model is given by , where , and stands for saving, investment, government expenditure, taxes, exports and imports, respectively.
If the country has trade surplus, which strategy/strategies among the following will reduce the trade imbalance?
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A simple Keynesian open economy model is given by S+T+M = G+I+X, where S,I,G,T,X, and M stands for saving, investment, government expenditure, taxes, exports and imports, respectively. If the country has trade surplus, which strategy/strategies among the following will reduce the trade imbalance? (A) Everything else being constant, decrease in private saving would reduce trade surplus. (B) Everything else being constant, increase in investment would reduce trade surplus. (C) Everything else being constant, increase in government taxes would reduce trade surplus. (D) Everything else being constant, decrease in government spending would reduce trade surplus.
National income accounting has come up 132 times in 6 exams since 2010.
This question is on Saving and investment identities, part of National income accounting in Macroeconomics.
The accounting links between saving, investment, the government budget and the current account.
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