An open economy with a low saving rate (private and public) must have:

Question

Quizplus · Accepted Answer

In an open economy, a low saving rate implies that the economy is not saving enough to fund its investments internally. This situation can lead to two outcomes: the economy might reduce its investment to match the low savings, or it might borrow from abroad to finance its investment, leading to a current account deficit. Thus, the correct answer is that the economy must have low investment or a current account deficit.

An Open Economy with a Low Saving Rate (Private and Public)