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a. Interaction between international and domestic events. i. Derive the accounting identity that connects the sources and uses of savings in the economy using the
a. Interaction between international and domestic events. i. Derive the accounting identity that connects the sources and uses of savings in the economy using the following information: . Value of Production: GDP =C + I + G + Exports(X) - Imports(M) . Value of Income: GNP = GDP + net primary income + net secondary income . Uses of Income: GNP = C + S+T . Current Account: CA = X - M + net primary income + net secondary income Figure 9.2 Savings and Investment, 2001-2018 30 25 20 15 10 Percent of GDP 0 -5 -10 T-G -15 Source: Data from IMF, World Economic Outlook Database, @ James Gerber. ii. Using the derived identity and the information in Figure 9.2: 1. Discuss why the decline in the CA balance from 2001 to 2003 is different from the decline in the CA balance from 2003 to 2006. 2. Discuss why the increase in the CA balance from 2006 to 2009 is different from the increase in the CA balance from 2009 to 2013
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