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Consumption+Gov Exp+Net Export+Investment= GDP (per expenditure measure of GDP)
move Net Export to the other side and change (- Net Export) to (Net Import) to get
C+G+I=NI+GDP, which means domestic generated income and net import are financing the three expenditures, C+G+I.
Since NI<G+I, C is necessarily financed by GDP. (Of course, the problem is assuming NI goes to G & I first, then any remaining surplus goes to C, which to me makes no sense at all) |
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