A country has $80 million of domestic investment and net capital outflow of -$20 million.What is saving?
A) -$80 million
B) -$60 million
C) $60 million
D) $80 million

Question

Quizplus · Accepted Answer

The national income identity equation states that domestic investment (I) equals domestic savings (S) plus net capital outflow (NCO): I = S + NCO. Therefore, S = I - NCO. Plugging in the given values, we get S = $80 million - (-$20 million) = $100 million. However, since saving cannot be negative, we ignore the negative sign and the final answer is $100 million, which is equivalent to choice C.

A Country Has $80 Million of Domestic Investment and Net