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In an open economy, national saving equals domestic investment a. plus the net outflow of capital abroad. b. minus the net exports of goods and services. c. plus the government’s budget deficit. d. minus foreign portfolio investment.
Principles of Macroeconomics (Mind...
Principles of Macroeconomics (Mind...
In an open economy, national saving equals domestic investment
a. plus the net outflow of capital abroad.
b. minus the net exports of goods and services.
c. plus the government’s budget deficit.
d. minus foreign portfolio investment.
Explanation of Solution
Option (a):
Saving is equal to investment. In other words, it is equal to domestic investment and the investment made in the foreign country. Thus, option “a” is correct.
Option (b):
Decreasing the value of net export from the investment made in the foreign country does not give national saving. Thus, option “b” is incorrect...
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