If Canada has negative net exports, which of the following must be true? (Assume that the capital account is zero and net transfers are zero.)
A)The balance on the financial account must equal the balance on the current account.
B)Net foreign investment must be negative as well.
C)Domestic private saving must be less than net foreign investment.
D)Domestic public saving must be less than net foreign investment.
E)Domestic public savings must be greater than domestic private savings.

Question

Quizplus · Accepted Answer

Negative net exports implies that the current account balance is negative, which means that Canada is a net borrower from the rest of the world. This would result in negative net foreign investment, as the rest of the world is holding more Canadian assets than Canada is holding foreign assets. The balance on the financial account does not necessarily have to equal the balance on the current account, and the levels of domestic private and public savings are not directly related to net exports.

If Canada Has Negative Net Exports, Which of the Following