If a current account deficit increases and investment levels remain the same, national saving must increase.

Question

Quizplus · Accepted Answer

A current account deficit occurs when a country imports more goods and services than it exports, indicating that its spending is higher than its income. If investment levels remain the same, national saving will not necessarily increase. In fact, it may decrease since the country is borrowing from other countries to finance its spending. To increase national saving, the country would need to reduce its spending, increase its exports or decrease its imports.

If a Current Account Deficit Increases and Investment Levels Remain