The uses-of-saving identity shows that if the government budget deficit rises,then one of the following must happen.
A)Private saving must rise, investment must fall, and/or the current account must fall.
B)Private saving must rise, investment must fall, and/or the current account must rise.
C)Private saving must rise, investment must rise, and/or the current account must fall.
D)Private saving must fall, investment must rise, and/or the current account must rise.

Question

Quizplus · Accepted Answer

The uses-of-saving identity in macroeconomics indicates that if the government budget deficit increases (meaning the government is spending more than it is earning), it must be financed by either an increase in private saving, a decrease in investment, or a worsening of the current account (meaning the country is spending more on foreign goods than it is earning from selling goods abroad). This is because the total amount of savings in an economy must equal the total amount of investment plus the government's budget balance plus the current account balance.

The Uses-Of-Saving Identity Shows That If the Government Budget Deficit