Suppose that the economy is in equilibrium, with the government budget in deficit and with saving less than investment.According to the circular-flow model, how do imports relate to exports?

Question

Quizplus · Accepted Answer

In a situation where the economy is in equilibrium with a government budget deficit and saving less than investment, imports must exceed exports. This is because the excess of imports over exports can finance the gap between domestic saving and investment, aligning with the national accounting identity where a trade deficit (imports > exports) corresponds to the excess of investment over saving.

Suppose That the Economy Is in Equilibrium, with the Government