Economic Knowledge (13) — Sectoral Balances, Two Surpluses, One Deficit

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Take that:

Assume that the national accounts of a nation reveal that its external surplus is equivalent to 2 per cent of GDP and the private domestic sector is saving overall 3 per cent of GDP. We would also observe: 

A.    A fiscal deficit equal to 1 per cent of GDP.

B.    A fiscal surplus equal to 1 per cent of GDP.

C.    A fiscal deficit equal to 5 per cent of GDP.

D.    A fiscal surplus equal to 5 per cent of GDP.

My answer: 

The first option, A, is correct.

My explanation: 

We have a situation whereby the non-government domestic financial balance, S - I,

S = saving/non-spending, 

I =  investment/spending, 

is in surplus by 3% of GDP. The domestic non-gov. sector is saving more than it spends. 

Some other sector (or sectors) must be feeding the domestic sector's surplus by creating a deficit for itself (deficits for themselves) that correspond(s) exactly to the domestic sector's surplus.  

The private domestic sector's interally generated financial blance is of necessity always zero, with every intra-sectorially generated liability being exactly offset by an intra-sectorially generated asset. 

(If an economy consists of only two persons, Betty and Joe, with Betty lending Joe $ 1, and Joe being indebted to Betty by $ 1, the sector has a net financial of $ 0. Betty is holding as asset of $ 1 and Joe is holding a liability of $ 1. Assets and liabilities add to zero — in the sector, there is no surplus of assets over liabilities, and vice versa. Assets do not exceed liabilities, liabilities do not exceed assets. Add as many Bettys and Joes as you like, add as many pairs of people in a creditor-debtor relationship, all and each belonging to the sector, then, as a matter of logic, the sector can never achieve a non-zero net financial position. Put differently: if all financial debt in the sector is extended entirely by members of the sector exclusively to members of the sector, if all creditors (holders of financial assets) belong to the sector and all debtors (holders of financial liabilties) belong to the sector, all assets and liabilities within the sector must sum to zero.)

If the assets of the sector are to exceed its liabilities, assets are needed that represent extra-sectoral liabilities. In other words, for the sector to accumulate net financial savings, another sector or other sectors must build up a position of net liabilities vis-à-vis the domestic non-government sector.

Further, the non-government external balance, X - M,

X = exports, M = imports, 

is in surplus by 2% of GDP. 

That is to say, via the non-government external sector, the economy is receiving more income from the rest of the world than it is paying to it, leaving the economy with a surplus of financial assets worth 2% of GDP. 

Now, this surplus — income coming into the economy from the rest of the world — funds 2% of the 3% of the private domestic sector's surplus (i.e. its accumulation of net assets corresponding to extra-sectoral net liabilities).

So, to account for the domestic sector's total surplus of 3 %, we need to identify a second sector, apart from the private external sector, that provides the remaining 1 % of extra-sectoral net liabilities.

This compels us to conclude that the government sector, G - T,

G = government spending,

T = government taxes/income,

is running a fiscal deficit, 

G > T, 

to the tune of 1% of GDP.

[Der nicht-staatliche Inlandssektor verzeichnet einen Überschuss (von Ersparnissen über Ausgaben) in Höhe von 3% des BIP. Der nicht-staatliche Auslandssektor verzeichnet einen Überschuss (von Einnahmen durch Exporte über Ausgaben aufgrund von Importen) von 2% des BIP. Dies lässt schließen auf

A --- staatliches Haushaltsdefzit von 1% des BIP

B --- staatlicher Haushaltsüberschuss von 1% des BIP

C --- staatliches Haushaltsdefizit von 5 % des BIP

D --- staatlicher Haushaltsüberschuss von 5 % des BIP

Meine Antowort : A.

Meine Begründung: Der Saldo der Aktiven und Passiven des nichtstaatlichen Binnensektors kann niemals ungleich Null sein, es sei denn es werden Aktiven erworben, die Passiva anderer Sektoren darstellen und eine Netto-Gläubiger-Position unseres Sektors gegenüber einem anderen Sektor/anderen Sektoren begründen), oder es entstehen in diesem Sektor Passiven, die in anderen Sektoren als Aktiven gehalten werden und eine Netto-Schuldner-Postion unseres Sektors gegenüber einem anderen Sektor/anderen Sektoren begründen). 

Wenn der betreffende Sektor nicht zum Netto-Gläubiger oder Netto-Schuldner eines anderen Sektors oder anderer Sektoren wird, so kann er weder einen Überschuss an Aktiven über Passiven noch einen Überschuss von Passiven über Aktiven erzielen.

In der vorliegenden Aufgabe verzeichnet die private Binnenwirtschaft einen Überhang an Aktiven von 3% des BIP. Dieser Überhang muss einem anderen Sektor oder anderen Sektoren entstammen. Da der private Außenhandelssektor selbst einen Überhang an Aktiven gegenüber Passiven (die von Ausländern gehalten werden) von 2 % des BIP erzielt und damit einen Teil des Aktiven-Überhangs des privaten binnenwirtschaftlichen Sektors ermöglicht, bleibt nur noch die Quelle des restlichen Überhangs in Höhe von 1% zu suchen. Den liefert der Staat mit einem Haushaltsdefizit in Höhe von 1%.]