Question

What are the two main sides of the national savings

and investment identity?

Short answer

Demand and supply of financial capital.

Step-by-step solution

Step1. Introduction 

The savings-investment identity is-

S + (M – X) = I + (G – T)

where,

S- Savings,

M- Imports,

X-Exports,

I- Investments,

G- Government Expenditure,

T- Taxes

Step2. Explanation 

The 2 main sides are supply and demand of financial capital.

savings include savings of household and business.

trade deficit leads to increased inflow of foreign capital hence it will comprise of supply.

Demand side includes- Investment, and the difference of government expenditure and taxation.