In goods market equilibrium in an open economy,
A)the desired amount of exports must equal the desired amount of imports.
B)the desired amount of exports must equal the desired amount of imports less the amount lent abroad.
C)the desired amount of national saving must equal the desired amount of domestic investment.
D)the desired amount of national saving must equal the desired amount of domestic investment plus the amount lent abroad.

Question

Quizplus · Accepted Answer

In goods market equilibrium in an open economy, the desired amount of national saving must equal the desired amount of domestic investment plus the amount lent abroad. This is because in an open economy, savings can be used for both domestic investment and for lending to other countries, which would be reflected in imports being greater than exports. Therefore, the total amount of national saving must also cover the amount lent abroad in addition to domestic investment.

In Goods Market Equilibrium in an Open Economy