National Accounts Identity for a Simplified Economy
In a simplified economic model without government or foreign trade, the national accounts identity is expressed as . This relationship is always true by definition, even when the economy is not in equilibrium. The reason it holds universally is that total output (Y) is defined to account for both planned expenditures—consumption (C) and planned investment (I)—and any unplanned changes in business inventories (II).
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National Accounts Identity for a Simplified Economy
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