《《05+Saving+and+Investment%2C+Part+2》.pdf

Agenda • Saving and Investment in Closed Economies Saving and Investment • Saving and Investment in Open Economies in Closed and Open 1. Small Open Economies Economies, Part 2 2. Large Open Economies 5-1 5-2 S and I in a Closed Economy S and I in a Closed Economy • Assumptions: • National income identity is now: 1. A closed economy. Y = C + I + G or I = Y – C – G • There are no imports or exports, i.e., M = X = 0. • National saving is: 2. Prices are fully flexible. S = Y – C – G • Makes this a long run analysis. 3. All markets are in equilibrium. • Goods market equilibrium is now: • There is perfect competition. S = I 5-3 5-4 1 S and I in a Closed Economy