|Author||Topic: Fundamental Relationship|
|I'm having touble with the fundamental relationship...whenever I come across problems asking about the deficit, I can only reason my way through it if I start with:
GDP=C+I+G+X-M=C+S+T... both these make sense to me. then I cancel the Cs and get to G=(S-I) - (X-M), but I still can't seem to conceptually make sense of this relationship? Can someone try and explain it in a very big picture way and then maybe with an example? I guess I'd just like to reason my way through it- why would very high savings lead to a deficit- is it because people's savings (in savings accounts) don't generate tax? I guess I don't even see the connection between high exports and a deficit. is that too related to taxes?