If a country has a trade deficit then A)S I and Y C + I + G. B)S I and Y

Question

If a country has a trade deficit then A)S > I and Y > C + I + G. B)S > I and Y < C + I + G. C)S < I and Y > C + I + G. D)S < I and Y < C + I + G.

Quizplus · Accepted Answer

If a country has a trade deficit, it means that it is importing more goods and services than it is exporting. Therefore, its savings (S) are less than its investments (I). This is reflected in option D, where S < I. Also, since the country is consuming more than it is producing, its national income (Y) will be less than its aggregate expenditure (C + I + G). Hence, option D is the correct choice.

If a Country Has a Trade Deficit Then