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Savings Equal Investment definitions

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  • National Savings
    Sum of household and government savings, representing income not used for consumption or government purchases.
  • Private Savings
    Income left to households after paying for consumption and taxes, forming part of national savings.
  • Public Savings
    Government’s tax revenue minus its spending, indicating fiscal health and contributing to national savings.
  • Investment
    Resources allocated by firms to increase future output, such as factories or machinery, distinct from financial assets.
  • Closed Economy
    Economic system with no trade with other countries, resulting in net exports equaling zero.
  • Open Economy
    Economic system engaging in international trade, where net exports influence investment and savings.
  • Net Exports
    Difference between exports and imports, affecting national income and investment in an open economy.
  • Net Capital Inflow
    Funds borrowed from abroad to finance domestic investment, arising when imports exceed exports.
  • Budget Surplus
    Situation where government tax revenue exceeds spending, resulting in positive public savings.
  • Budget Deficit
    Condition where government spending surpasses tax revenue, leading to negative public savings.
  • Gross Domestic Product
    Total value of goods and services produced within a nation, calculated using the expenditure approach.
  • Expenditure Approach
    Method for calculating GDP by summing consumption, investment, government purchases, and net exports.
  • Consumption
    Spending by households on goods and services, forming a major component of GDP.
  • Government Purchases
    Expenditures by the government on goods and services, included in GDP calculations.
  • Trade Deficit
    State where imports exceed exports, resulting in borrowing from foreign sources to finance investment.