unit-5-monetary-and-financial-resources

Unit-5 Monetary and Financial Resources

This unit discusses these aspects which have a crucial bearing on the flow of monetary and financial resources needed for the development of the economy.

How is saving defined and measured in an economy?


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Learning Pundits Content Team

Written on Jun 26, 2019 3:47:14 PM

Saving constitutes that part of national product that has not been used up in consumption expenditure. The economy’s gross domestic product (Y) is divided among four components viz. consumption (C), investment (I), government purchases (G) and net exports (Nx ).

The ‘net’ in exports refers to the fact that imports are subtracted from exports i.e. Nx = X – M, where X stands for exports and M for imports.

The subtraction is made because imports of goods and services are included in other components of the GDP. Total expenditure on the economy’s output of goods and services is the sum of C, I, G and Nx.

We state it as follows: Y = C + I + G + Nx ............................(1)

National savings is the income of the nation that is left after providing for current consumption and government purchases. Thus, national savings, S, equals Y - C – G. If we rearrange equation (1) to reflect this fact we get:

Y - C - G = I + Nx .................................(2)

S = I + Nx ................................(3)



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