As the U.S. budget deficit shrank in the 1990s, the increase in U.S. national saving was ______ than the expansionary shift in the U.S. investment function, resulting in a trade ______.
A) stronger; deficit
B) stronger; surplus
C) weaker; deficit
D) weaker; surplus

Question

Quizplus · Accepted Answer

The increase in U.S. national saving was weaker than the expansionary shift in the U.S. investment function, leading to a trade deficit. When national saving increases by less than the increase in investment, it implies that the country is investing more than it is saving, which typically results in a trade deficit because it needs to borrow from abroad to finance the excess investment.

As the US Budget Deficit Shrank in the 1990s, the Increase in Increase