In a closed, mixed economy, equilibrium is reached when saving(S)
equals investment spending(I), but this is not the case in an open,
mixed economy.

Is this statement right? why?

Hello mike5-ga,

As background, in a closed economy Y (income) = E (expenditure) which
is a basic Keynesian rule of economics, from this,
S (savings) is a 'leakage' (expenditure that is withheld from the
system)
I (investment) is an 'injection' (extra expenditure funded from
savings)

Y = E + S    or    S =Y - C
Y = E + I    or    I = Y - C

..therefore in a closed economy S (savings) = I (investment), and
investment can never be greater than savings, infact investment always
equals savings.

The statement is correct as the normal balance (equilibrium) of a
closed economy is disturbed by external variables such as 'foreign'
investment such as cash injections into the once 'closed' economy.
Similarly savings may not stay within the economy and migrate to
another. Clearly with this interchange of savings and investments
between one economy and another, certain economies will accrue either
more savings and investments than another. This creates an imbalance
and the equilibrium of a closed economy is breeched causing
disequilibrium.

Additionally if goods are imported from one economy to another this
will affect the level of investment, as firms pull back production as
some of the domestic demand is satisfied by foreign goods. Similarly
savings will be affected as some expenditure will be on imported
goods, and there will be an outflow of money.


Search Strategy:
Chapter 17 "National Income Determination" page 203 
"Key Facts Passbook - Economics" by Roger Maile BA  
Published 1980 by Intercontinental Book Productions  

I hope that helps, if you need clarification of the answer just ask.

Kind regards
lot-ga

---

Clarification of Answer by lot-ga on 05 Dec 2002 12:08 PST

Opps, typo 
the above should be

Y = E + S    or    S = Y - E
Y = E + I    or    I = Y - E

regards
lot-ga