User:Ali Kamran 786

Saving =Investment? It is said that there are 3 ways to calculate national income accounting 1) National Income= Y                                                         2) Aggregate  Expenditures =E )3) Aggregate Output = O             National income: There are four factors of productions Land Labour Capital & Entrepreneur The total amount earned by these factors of production earned in a year it might be a calendar year or fiscal year

the national income of that country.

Aggregate Expenditures                     The total amount of expenses done in any country in a year if calculated will be the aggregate expenditure's of a country.

Aggregate Output:

The total amount of output produced by the four factors of production will be the aggregate output of a country.

We can write it in a equation as            Y = O= E➡ eq(1) We can break this equation                  Y= O. ➡ eq(2) .                                 Y= E  ➡ eq(3 ). O = E ➡ eq(4) .                                 the income earned by the factor of production can either be saved or consumed we can write it as                 Y = C + S ➡ eq(5) .                            if the savings are deposited in banks they will used as source of investment by the Entrepreneur or Investors we can write in equation as                                Y= C+ I ➡ eq(6) .                                  S= I ➡ eq(7) .                                in equation no 3 Y= E So we can write E= C+ S ➡ eq(8) Saving is that part of income which is not expenditures or we can assume savings are zero So we can write E= C ➡ eq(9) If the savings are zero than the investment is also zero because S=I ➡ eq(7). If the rate of investment in any country is zero this means that output in that country is also zero because output cannot be produced without investment.