In a small open economy, if domestic investment exceeds domestic saving, then the extra investment will be financed by:
A)borrowing from abroad.
B)lending from abroad.
C)the domestic government.
D)the World Bank.

Question

Quizplus · Accepted Answer

If domestic investment exceeds domestic saving, there is a deficit in the country's capital account. To finance this deficit, the country must borrow from abroad, either through taking out loans or attracting foreign direct investment.

In a Small Open Economy, If Domestic Investment Exceeds Domestic