There is an intimate relationship between a country's BCA and how the country finances its domestic investment and pays for government expenditures. Given this, which of the following is a true statement?
A)If (S - I)

Question

There is an intimate relationship between a country's BCA and how the country finances its domestic investment and pays for government expenditures. Given this, which of the following is a true statement?
A)If (S - I) < 0, it implies that a country's domestic savings is insufficient to finance domestic investment.
B)If (T - G) < 0, it implies that a country's tax revenue is insufficient to finance government spending.
C)When BCA is negative, it implies that government budget deficits an/or part of domestic investment are being finance with foreign-controlled capital.
D)All of the above are true.

Quizplus · Accepted Answer

A) If (S - I) < 0, it means that a country is saving less than what is needed to finance domestic investment, which could lead to borrowing from other countries.
B) If (T - G) < 0, it means that a country's tax revenue is less than its government spending, which could lead to borrowing or printing more currency.
C) A negative BCA means that a country is importing more than it is exporting, which could lead to a deficit in foreign exchange reserves. If the country uses foreign-controlled capital to finance its government or investment, it could worsen the situation by increasing the amount of debt owed to foreign entities.

There Is an Intimate Relationship Between a Country's BCA and How