What Can We Do In Response to Fall in Investment Spending?

        (S - I) + (T - G) + (M - X) ≡ 0

• If first term in Sectoral Balances equation (domestic private sector balance) is growing,

  • ... one or both of the two other terms must be shrinking

• Either:

  • Government sector balance must be moving from surplus into deficit (or deeper into deficit)

• And/Or:

  • Foreign sector's balance against the nation's economy must be moving from surplus into deficit (or deeper into deficit)

    • That means nation must start running trade surplus against Rest of World