Net exports, the government budget, saving and investment

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  59138 Value of the multiplier & sum of saving Suppose that the MPC is 0.8, while the sum of planned investment, government purchases, and net exports is $500 billion. Suppose also that the government budget is in balance.

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  Since exports would remain about the same, we could anticipate that net exports would increase, not decrease. Public saving is the sum of budget surpluses (deficits) for federal, state, and local governments.

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  122834 Deficit state A government budget deficit is financed by a combination of (a) saving rising relative to domestic investment and imports rising relative to exports.

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  National income or GDP is composed of consumption, government spending, investment, and net exports.

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  Calculate the government saving (the budget surplus) Calculate the level of private saving, and show that private saving plus government saving plus rest of world saving equals investment.

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