The equation NX = S + (TA - G - TR) - I implies that
A)there is always a close correlation between the government budget deficit and the trade deficit
B)if national saving increases relative to domestic investment, the trade deficit will decrease
C)a reduction in the government budget deficit is likely to raise the level of saving and/or worsen the trade deficit
D)an increase in government spending will stimulate exports
E)a tax decrease can help to create a trade surplus

Question

Quizplus · Accepted Answer

The equation NX = S + (TA - G - TR) - I implies that an increase in national savings relative to domestic investment (I) will decrease the trade deficit (NX). This is because an increase in S means there is more money available for investment or for paying off debt, which reduces the need to borrow from foreign countries and therefore reduces the trade deficit. None of the other answer choices are supported by the equation.

The Equation NX = S + (TA - G -