In a small open economy, if domestic saving equals $50 billion and domestic investment equals $50 billion, then
There is and net capital outflow equals .

A)a trade deficit; $100 billion
B)balanced trade; $0
C)a trade surplus; $100 billion
D)balanced trade; $100 billion

Question

In a small open economy, if domestic saving equals $50 billion and domestic investment equals $50 billion, then
There is and net capital outflow equals .
 
A)a trade deficit; $100 billion
B)balanced trade; $0
C)a trade surplus; $100 billion
D)balanced trade; $100 billion

Quizplus · Accepted Answer

In a small open economy, if domestic saving equals domestic investment, then there is no net capital outflow or inflow, and trade is balanced.

In a Small Open Economy, If Domestic Saving Equals $50