Suppose a country's net capital outflow does not change,but its investment rises by $250 billion.
A)Its saving must have risen by $250 billion so its net exports have risen.
B)Its saving must have risen by $250 billion,but its net exports are unchanged.
C)Its saving must have fallen by $250 billion,so its net exports have fallen.
D)Its saving must have fallen by $250 billion,but its net exports are unchanged.

Question

Quizplus · Accepted Answer

Net capital outflow (NCO) is equal to investment minus national saving. If NCO does not change, but investment rises by $250 billion, it must mean that national saving also rose by $250 billion to balance the equation. However, this does not necessarily mean that net exports have risen since NCO and net exports are not directly related. Therefore, option B is the best choice.

Suppose a Country's Net Capital Outflow Does Not Change,but Its