【正文】 ote: C includes both private consumption and government consumption (G). 15 III. GNP 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。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。 in 100 million RMB 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。 NFP Source: NBSC。 Domestic Absorption As we have known that, Y=C+I+G+XM, if NFP=0 In the right hand of the identity, C, I, and G constitutes the gross expenditures of a country’s residents. We use A hereinafter to represent this item, we then obtain, A=C+I+G In this way, current account can also be viewed as the abstraction of national ine and absorption. CA=YA ?National Ine Account 22 ?What can we learn from CA=YA? Conclusions: The identity simply means that in an open economy, a country’s ine must not equal to the domestic expenditures, which should be hold in the closed economy. Also this tells us that in an open economy, resources can be allocated internationally. Table 113 shows the relations among these variables in China. Where Y is approximated by GDP, and column 8 is calculated according to the identity. We can see that it is the same to the time series data in column 6. ?National Ine Account 23 Table 112 China’s Absorption amp。 Investment As we have seen, Y=C+I+G+XM=C+Sp+T ?National Ine Account 25 28 00 24 00 20 00 16 00 12 00 80 0 40 004 001 98 0 1 98 5 1 99 0 1 99 5 2 00 0 2 00 5N I I P C AFigure 116 . Current Account amp。 Omissions ?Balance of Payments Account 42 Figure 1171 China’s Balance of Payments Source: SAFE。 F i n a n c e A c c ou n t R e s e r v e s E r r or s amp。 ? M = P e s s i m i s t i c a r g u m e n t J i n a n d Z h ou ( 2020) 1994 2020 M on t h l y A R D L M L doe s n ot h ol d D a i ( 1997) 1981 1995 Y e a r l y O L S ? X = 1. 0