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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

If domestic Investment increases, and there is no change in the amount of private and public saving, what must happen to the size of the trade deficit?

To determine

The effect on the size of the trade deficit is to be determined when there is an increase in the domestic investment and private and public savings does not change.

Explanation

In the financial capital market, supply of financial capital is equal to demand of financial capital. Where supply consists of savings , trade deficit (imports(M)-exports(X))which is capital inflow from outside, government spending(G) ,taxes(T) which is T-G means taxes are more than government spending and demand consists of investment(I)

Supply of financia...

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