Author Question: Explain why, in a simple economy which does not include the government or taxation, saving equals ... (Read 70 times)

tth · **on:** Jun 30, 2018

Explain why, in a simple economy which does not include the government or taxation, saving equals investment at the equilibrium level of output.

What will be an ideal response?

Question 2

Which of the following statements is TRUE about the success of the World Bank?

A) The World Bank has been successful because it has focused on its primary function of making loans to governments.
B) The World Bank has not been successful because it has focused on making loans to governments where there has been a loss of confidence in a nation's financial system.
C) The World Bank has not been successful because many loans have been made to countries that can attract private funds.
D) The World Bank has been very successful in promoting economic growth because loans have been primarily made to countries that have trouble attracting private funds.

aprice35067 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

In this simple economy, the value of output (y) equals the value of income. Households can either consume or save income, so saving equals output minus consumption (S = y - C). In this economy, output equals consumption plus investment (y = C + I). Since y = C + I and S = y - C (or, rewritten, y = C + S), this means C + I = C + S, or saving equals investment (S = I).

Answer to Question 2

C