Economic Reform Australia Blog

The sectoral accounting equation

The sectoral accounting equation is (I - S) + (G - T) + (X - M) = 0     where (I – S) = private sector balance,  (G – T) = public sector balance,  (X – M) = foreign sector balance. The term (I-S) represents productive investments (I is total investment, S is total savings).  In monetary terms … [Read more...]