Question

The equation represents the savings and investment identity for the country of Moonzealand (all values are in billions of DolurMoonZees). Private savings+Inflow of foreign savings=Private investment+Government deficit 85.0+45.0=130.0+0.0a.What is the total financial capital demanded?b.What is the total quantity supplied of financial capital?

Answer 1

Answer:

$130 billions, $130 billions

Explanation:

We know that

Private savings + Inflow of foreign savings = Private investment + Government deficit

The right hand side reflect the total financial capital demanded and the left hand side reflect the total quantity supplied of financial capital

So, in the given case

Total financial capital demanded = $130 billions

And, the Total quantity supplied of financial capital would be

= $85 billion + $45 billions

= $130 billions

Hence, the demand and supply are equal