Savings, investment spending, and the financial system – end of chapter
assume a hypothetical economy that is open to capital inflows and outflows, so that net capital inflow equals imports (im) minus exports (x). b. the economy has the following properties: x = $85 million im = $135 million budget balance = $100 million private savings = $250 million calculate investment (i) in millions of dollars. i = $ million

$400 million    

Explanation:

Given that,

X = $85 million

IM = $135 million        

Budget balance = $100 million

Private savings = $250 million

Net capital inflow = imports (IM) - exports (X)

                             =  $135 million - $85 million

                             = $50 million

Investment spending = Private savings + Budget balance + Net capital inflow

                                    = $250 million + $100 million + $50 million

                                    =  $400 million    

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