Suppose a country's net capital outflow does not change, but its investment declines by $420 billion. Its saving must have
A)fallen by $420 billion, so its net exports have risen.
B)fallen by $420 billion, but its net exports are unchanged.
C)risen by $420 billion, so its net exports have fallen.
D)risen by $420 billion, but its net exports are unchanged.

Question

Quizplus · Accepted Answer

In an open economy, national saving equals domestic investment plus net capital outflow. If net capital outflow is unchanged and investment declines, saving must also decline by the same amount. However, net exports, which equal net capital outflow, remain unchanged because the net capital outflow is unchanged.

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