The following equation represents the Savings and Investment equation for the country of Mondobongo (all values are in billions of Fake Mon Bons): Private Savings + Inflow of Foreign Savings = Private Investment+ Government Deficit 15.0 + 45.0 = 130.0 + 0.0 What is the total quantity demanded of financial capital? What is the total quantity supplied of financial capital? Solution Demand for financial capital is investment + government expendtiure-tax. Here only one component investment is present. Therefore demand for finacial capital is 130. Supply of financial capital is savings is 130 85+45 = 130 Demand of financial capital should always be equal to supply of financial capital Demand = supply investment+government expenditure - tax = savings +trade deficit.

1. The following equation represents the Savings and Investment equation for the country of
Mondobongo (all values are in billions of Fake Mon Bons): Private Savings + Inflow of Foreign
Savings = Private Investment+ Government Deficit 15.0 + 45.0 = 130.0 + 0.0 What is the total
quantity demanded of financial capital? What is the total quantity supplied of financial capital?
Solution
Demand for financial capital is investment + government expendtiure-tax. Here only one
component investment is present. Therefore demand for finacial capital is 130.
Supply of financial capital is savings is 130
85+45 = 130
Demand of financial capital should always be equal to supply of financial capital
Demand = supply
investment+government expenditure - tax = savings +trade deficit