【正文】 1 Contents ?National Ine Account ?Balance of Payments Account ?Assignments 2 ?National Ine Account I. Identities in a Closed Economy Y=C+I+G [*] Where, Y, C, I, and G denote output, consumption, and government expenditure respectively. National ine can also be divided into C, Sp( private saving), and T(taxes), thus, Y=C+Sp+T [**] The two measures are equivalent, hence Y=C+I+G=C+Sp+T 3 After a very simple manipulation, one can easily obtain, I= Sp+(TG) Where, (TG) in the right hand is government saving (Sg). Therefore, I=S=Sp+Sg This is the identity we are quite familiar with. II. Identities in an Open Economy What Is Open Economy? Cross border movements of modity, capital amp。 labor. ?National Ine Account 4 International Flows of Commodities ?Identity Let X represent exports, M represent imports, Y=C+I+G+XM Where, XM is also referred to as export or trade balance (a case of China is illustrated in Figure 111). Openness of Trade: Openness=(X+M)/Output% An example is presented in Figure 112. ?An imaginary example ?National Ine Account 5 Figure 111 China’s Net Export Source: NBSC。 in 100 million RMB 01 0 0 0 02 0 0 0 03 0 0 0 04 0 0 0 05 0 0 0 06 0 0 0 07 0 0 0 08 0 0 0 0 8 0 0 0 4 0 0 004 0 0 08 0 0 01 2 0 0 01 6 0 0 02 0 0 0 02 4 0 0 050 55 60 65 70 75 80 85 90 95 00 05E X P O R T I M P O R T N E X P O R T6 Figure 112 China’s Openness Source: NBSC。 in 100 million RMB amp。 % 04 00 008 00 001 20 00 01 60 00 02 00 00 02 40 00 02 80 00 001020304050607055 60 65 70 75 80 85 90 95 00 05X P L U S M G D P O P E N N E S S7 An imaginary economy, Agraria, whose only output is wheat. Each citizen is a consumer of wheat, and also a farmer. Farmers invest by putting aside a portion of each year’s crop as seed for the following year’s planting. There is also a government that appropriates part of the crop to feed the Agrarian army. Agraria’s total annual crop is 100 bushels of wheat. Agraria can import milk from the rest of the world in exchange for exports of wheat. We cannot draw up the Agrarian national ine accounts without knowing the price of milk in terms of wheat. Assume the price of milk is bushel of wheat per gallon, and Agrarians want to consume 40 gallons of milk, then its imports are equal to 20 bushels of wheat. ?National Ine Account 8 Source: Krugman and Obstfeld (2020), . The table below presents a simple calculation of the country’s national ine account. Consumption is divided between wheat and milk, with 55 bushels of wheat and 40 gallons of milk (20 bushels of wheat) consumed. 25 bushels of wheat are invested, 10 are purchased by the government, and 10 are exported abroad. G N P G ove r nm e nt ( t ot a l out put ) = C ons um pt i on + I nve s t m e nt + P ur c ha s e s + E xpo r t s — I m por t s 100 = 75a + 25 + 10 + 10 — 20b a. 55 bus he l s of w he a t + ( 0. 5 bus he l pe r ga l l on ) ? ( 40 ga l l ons of m i l k) b. 0. 5 bus he l pe r ga l l on ? ( 40 ga l l ons of m i l k) . ?National Ine Account 9 A Glimpse of Output Components ?Consumption The largest ponent of a country’s output (see Figures 113 and 114 for an illustration of both the . and China’s consumptions shares). In the . the share of consumption in the GDP ranges from 6270% ever since the Korean War. China is a little bit lower, however. It seems that the . has been consuming too much while on the contrary, Chinese has been consuming too little since 1970s. ?National Ine Account 10 ?Investment In the ., (gross) investment has fluctuated between 12 and 19% of GNP in recent years (Figure 114). However, it is quite another picture for China. As we can see from Figure 113 or Table 112, there exists a phenomenon called overheated investment in China, which is a main contributor to China’s overheated economy nowadays. Notice also that investment here is necessarily different from the term monly used in finance! ?National Ine Account 11 ?Government Purchases As we can see from Figures 113 and 114, there is no significant difference between the two economy. ?Net Export Figure 114 tells us that since the mid 1970s, the imports have been overrunning the exports in the . Question: Is there any linkage between the consumption and export in an open economy? ?National Ine Account 12 Figure 113 Components of China’s GNP Source: NBSC。 in percentage 10010203040506078 80 82 84 86 88 90 92 94 96 98 00 02 04 06C O N S U M T I O NI N V E S T M E N TG O V E R N M E N TN E T E X13 100102030405060708060 65 70 75 80 85 90 95 00 05C O N S U M P T I O NI N V E S T M E N TG O V E R N M E N TN E T E X P O R TFigure 114 Components of the . GDP Source: Dept. of Commerce。 in percentage 14 Table 111 Contributions of C, I, amp。 Net Exports Source: NBSC F i na l c ons um pt i on e xpe ndi t ur e G r os s c a pi t a l f or m a t i on N e t e xpo r t s of goo ds amp。 s e r vi c e s s ha r e（ % ） c ont r i but i on（ pe r c e nt a ge poi nt s ） s ha r e （ % ） c ont r i but i on（ pe r c e nt a ge poi nt s ） s ha r e（ % ） c ont r i but i on（ pe r c e nt a ge poi nt s ） 1978 1993 M e a n 63. 43 6. 32 35. 41 3. 91 11. 70 0. 36 V a r i a nc e 17. 07 2. 85 24. 35 3. 50 26. 72 3. 06 1994 2020 M e a n 47. 28 4. 44 40. 49 3. 97 12. 22 1. 52 V a r i a nc e 13. 52 0. 84 18. 51 1. 96 22. 44 2. 20 1978 2020 M e