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What Is the Effect on Trade Deficits of a Country's

Question 5

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What is the effect on trade deficits of a country's saving rate?


A) A low savings rate means that consumers are buying more, and more buying leads to an increase in a country's trade deficit.
B) A low savings rate means that people are spending more than they earn and that results in increased financial difficulties for consumers, higher interest rate, and fewer international sales, resulting in a decrease in a country's trade deficit.
C) A high savings rate means that there is more money available for investment which results in greater production and increased international sales which lead to lower trade deficits.
D) A country's savings rate has no effect on the country's trade deficit.

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