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Relation between Domestic saving domestic investment and net exports in the economy?
Wiki User
∙ 15y ago
The national account:
Y = C + I + G + (X-M)
rearrange that equation
1) Y-C = I + G + (X - M)
We also know that the income (Y) of a country can be a measure of income, so:
Y = C + T + S
OR
2) Y - C = T + S
By substituting the equation 2 into equation 1, we get:
T + S = I + G + (X - M)
and rearrange this formula into:
(X - M) = T - G + (S - I)
so the higher the saving, the higher the net export, and vice versa.
(Taken from: Miles and Scott, 2002, "Macroeconomics: Understanding of Wealth of Nations", pp. 479-480)
Wiki User
∙ 15y ago
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