Figure 13.2.Australian Economy Under a Fixed Exchange Rate System
-Refer to Figure 13.2.Starting at equilibrium income $50 billion,where (S-I) ₀ intersects (X-M) ₀,suppose that increased thriftiness leads to an autonomous increase in Australian saving of $5 billion.Australian income thus ____ which leads to Australia's trade account moving to a ____.

Question

Figure 13.2.Australian Economy Under a Fixed Exchange Rate System

-Refer to Figure 13.2.Starting at equilibrium income $50 billion,where (S-I) ₀ intersects (X-M) ₀,suppose that increased thriftiness leads to an autonomous increase in Australian saving of $5 billion.Australian income thus ____ which leads to Australia's trade account moving to a ____.

Quizplus · Accepted Answer

Increased thriftiness leads to higher savings, reducing consumption and thus income. This decrease in income results in a lower demand for imports, improving the trade balance to a surplus.

Figure 132