Economic Model of National Savings
In this simple economic closed economy model there are three uses for GDP, (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:
(Y - T) is 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 national savings not used to financed domestic investment
=NX (Trade balance)
Read more about this topic: National Savings
Famous quotes containing the words economic, model and/or national:
“Just as men must give up economic control when their wives share the responsibility for the family’s financial well-being, women must give up exclusive parental control when their husbands assume more responsibility for child care.”
—Augustus Y. Napier (20th century)
“AIDS occupies such a large part in our awareness because of what it has been taken to represent. It seems the very model of all the catastrophes privileged populations feel await them.”
—Susan Sontag (b. 1933)
“In the past, it seemed to make sense for a sportswriter on sabbatical from the playpen to attend the quadrennial hawgkilling when Presidential candidates are chosen, to observe and report upon politicians at play. After all, national conventions are games of a sort, and sports offers few spectacles richer in low comedy.”
—Walter Wellesley (Red)