In the classical model,even when a country runs a trade deficit,Say's law holds.

Question

Quizplus · Accepted Answer

According to the classical model, Say's law holds even in the case of a trade deficit. Say's law states that the production of goods and services generates income that is sufficient to purchase all that is produced. In other words, supply creates its own demand. This means that even if a country is importing more than it is exporting (i.e. running a trade deficit), the income generated by domestic production is sufficient to purchase all the imports as well as any other goods and services produced domestically. Therefore, Say's law still applies in this situation.

In the Classical Model,even When a Country Runs a Trade