Savings and Investment
In the first paragraph we will explain how these policies affected saving and investment in the New Zealand economy but we can never look at savings and investment seperately as we need savings in order to have investment. We can explain this first in simple terms as when an economy is running a current account deficit, this means in theory that net exports added with net inflow of income equals to a negative amount. As a result of this disposable income must be less than domestic spending, meaning that savings will be less than investment. As this is not possible this must mean that the country is receiving some of its investment from abroad. This is what had occurred in New Zealand but the investment from aboard had gotten out of control to a point where it had got out of control. Monetary policy affected as when the Reserve Bank of New Zealand had decided... [continues]
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