If there is an increase in the future marginal product of capital in a large open economy,it causes the current account to ________ and saving to ________.
A)fall;rise
B)rise;remain unchanged
C)fall;remain unchanged
D)rise;rise

Question

Quizplus · Accepted Answer

An increase in the future marginal product of capital makes investment more attractive, leading to higher investment today. This increases the demand for funds, which can lead to a decrease in the current account balance (fall) as the economy borrows from abroad. Meanwhile, saving may rise as individuals anticipate higher future returns.

If There Is an Increase in the Future Marginal Product