Question

Explain the sectoral balances approach to macroeconomic analysis and how they are related and why.

Answer 1

Sectoral balances is the private sector has budget deficit the government sector together must have surplus and the government sector has budget deficit the private sector together must have surplus.The private sector include domectic and foreign sectors.The balances is possible one sector is borrowing the another sector take together must have lending.

Sectoral balance approach to macroeconomics analysis of the budget or surplus of government sector and private sector in economy. In sectoral balance one of the sectors have deficits the other sectors that loss must be compensated in economy.

InIsector balance is deficit or surplus are zero i.e

Government sector + private sector + public sector = 0

If it is positive value says that surplus or savings in economy and deficit or dissavings in economy.