If saving is less than domestic investment,then A)there is a trade deficit and Y C + I + G. B)there is a trade deficit and Y C + I + G. D)there is a trade surplus and Y

Question

If saving is less than domestic investment,then A)there is a trade deficit and Y > C + I + G. B)there is a trade deficit and Y < C + I + G. C)there is a trade surplus and Y > C + I + G. D)there is a trade surplus and Y < C + I + G.

Quizplus · Accepted Answer

If saving is less than domestic investment, it means that there is a shortage of funds to finance investment, which leads to borrowing from other countries. This increases imports and leads to a trade deficit. As a result, Y < C + I + G, as the expenditure on imports adds to the domestic consumption and government spending, further widening the gap between domestic production and expenditure.

If Saving Is Less Than Domestic Investment,then