What does a trade surplus imply? 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

What does a trade surplus imply? 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 implies that a country is exporting more goods and services than it is importing, resulting in an increase in the country's saving because it is receiving more income from exports than it is spending on imports. This will lead to saving being greater than domestic investment, and an increase in GDP (Y) relative to consumption (C), investment (I), and government spending (G). Therefore, A is the correct choice.

What Does a Trade Surplus Imply