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

Question

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

Quizplus · Accepted Answer

A trade surplus means that a country is exporting more than it is importing, which leads to an increase in saving of the domestic currency. This is because the exporters receive foreign currency which they exchange for domestic currency, leading to an increase in the demand for domestic currency. The increased saving leads to a situation where saving is greater than domestic investment and Y > C + I + G.

If There Is a Trade Surplus Then