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mathwhiz123
mathwhiz123, Master Math Tutor
Category: Business and Finance Homework
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Experience:  Tutored math to students in college, of which included financial and accounting calculations.
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In the context of the saving-investment balance and purely

Customer Question

In the context of the saving-investment balance and purely as an accounting identity, which variable or variables are directly affected and what would happen to gross private domestic investment (I) if:

a) Domestic saving by households was to decrease, everything else remaining the same?

b) U.S. net tax receipts were to increase, everything else remaining the same?

c) There was a sudden increase in exports from the U.S., everything else remaining the same?

d) Pre-tax business profits were to increase, everything else remaining the same?

e) Federal grants to state and local governments were to disappear, everything else remaining the same?

Recall the saving-investment balance is given as:

S + (M-X) = I + (G-T) where S is domestic saving by households and businesses, M is U.S. imports of
goods and services, X is U.S. exports of goods and services, I is private domestic investment in capital
goods, G is total federal, state and local government spending on goods and services, and T is the net
receipt of tax revenues by federal, state and local governments
Submitted: 3 years ago.
Category: Business and Finance Homework
Expert:  Josie-Mod replied 3 years ago.

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Customer: replied 3 years ago.

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Customer: replied 3 years ago.
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Expert:  mathwhiz123 replied 3 years ago.
Hello. I'll have it ready for you. When do you need it by?
Customer: replied 3 years ago.
Send it now?
Customer: replied 3 years ago.
When will you send it?
Expert:  mathwhiz123 replied 3 years ago.
In the context of the saving-investment balance and purely as an accounting identity, which variable or variables are directly affected and what would happen to gross private domestic investment (I) if:

S + (M-X) = I + (G-T)

a) Domestic saving by households was to decrease, everything else remaining the same?

S decreases, I decreases because less savings is less money to invest.

b) U.S. net tax receipts were to increase, everything else remaining the same?

T increases, S decreases, I unchanged but could decrease because potential investment in the form of savings was taken in taxes.

c) There was a sudden increase in exports from the U.S., everything else remaining the same?

X increases, S increases, I could increase later due to increased savings from exports.

d) Pre-tax business profits were to increase, everything else remaining the same?

S increases, I could increase due to increased savings.

e) Federal grants to state and local governments were to disappear, everything else remaining the same?

G decreases, I could increase if that meant that Taxes were raised to pay for the G spending.


If you have questions, please let me know
Customer: replied 3 years ago.

Are the answers to the questions from a purely accounting perspective?

Expert:  mathwhiz123 replied 3 years ago.
As best as I could. I'm a math major.