The equation represents the savings and investment identity for the country of Mondobongo (all values are in billions of FakeMonBons)

Economics Mar 19, 2021

The equation represents the savings and investment identity for the country of Mondobongo (all values are in billions of FakeMonBons). Private savings+ Inflow of foreign savings = Private investment + Government deficit Assume private savings equals 91.0, inflow of foreign savings equals 39.0, private investment equals 112.0, and government deficit equals 18.0.

1) What is the total financial capital demanded?

2)What is the total financial capital supplied?

Expert Solution

1) Computation of Financial Capital Demanded:

Financial Capital Demanded = Private Investment + Government Deficit

= 112+18

= 130 billions

2) Computation of Financial Capital Supplied:

Financial Capital Supplied = Private saving + Inflow of foreign savings

= 91 + 39

= 130 billions

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