According to the savings-investment spending identity, savings and investment spending are always equal for the economy as a whole.

Question

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The savings-investment spending identity, also known as the national income accounting identity, states that total savings in the economy must always equal total investment spending. This is because every dollar saved by households, businesses, and governments is ultimately used to fund investment projects, which create new assets and productive capacity in the economy. Therefore, if we add up all the savings and investment spending in the economy, the total should always be the same. Mathematically, this can be expressed as:

Savings (S) = Investment (I)

or, equivalently:

S + (T – G) + (M – X) = I

where S is private savings, T is total taxes, G is total government spending, M is total imports, and X is total exports. This identity holds true in both closed and open economies, and is a fundamental principle of macroeconomics.

According to the Savings-Investment Spending Identity, Savings and Investment Spending