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

Question

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

Quizplus · Accepted Answer

When saving is greater than domestic investment, it indicates that a country is saving more than it is investing domestically. This excess saving is typically invested abroad, leading to a trade surplus. The equation Y = C + I + G (where Y is national income, C is consumption, I is investment, and G is government spending) does not directly relate to the trade balance. However, a trade surplus implies that the country is exporting more than it is importing, contributing positively to its national income. Thus, the statement "Y > C + I + G" is not directly related to the condition of saving being greater than domestic investment, but the correct relation is that a trade surplus is associated with saving being greater than domestic investment.

If Saving Is Greater Than Domestic Investment, Then There Is