The goods market - Investment Equals Saving: An Alternative Way of Thinking About the Goods–Market Equilibrium
3 important questions on The goods market - Investment Equals Saving: An Alternative Way of Thinking About the Goods–Market Equilibrium
What is private saving and to what does it equal? Also rearrange the formula one time.
By definition, private saving (S), saving by consumers, is equal to their disposable income minus their consumption
S=Yd-C ---->
The definition of disposable income leads us to private saving as income minus taxes minus consumption:S=Y-T-C
What equals public saving and what are transfers?
By definition, public saving, is equal to taxes (net of transfers=na overdrachten (anders wordt het natuurlijk 2 keer geteld, want dan tel je die overdrachten hier en als C van de mensen die ze ontvangen) minus government spending, T-G.- Transfers: a redistribution of income and wealth by means of the government making a payment, without goods or services being received in return.
What is the IS relation and to what market is it related?
- IS relation: Investment equalsSaving
- Market: goods market
- Connection to corporate finance: decision of corporations to invest: companies can only invest if people and government save something.
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