If Canada has a net export surplus, which of the following must be true?
A)The balance on the financial account must equal the balance on the current account.
B)Net foreign investment must be positive as well.
C)Domestic private saving must be greater than net foreign investment.
D)Domestic public saving must be greater than net foreign investment.
E)Investment equals domestic savings.

Question

Quizplus · Accepted Answer

A net export surplus means that the value of exports (which contribute to the current account) is greater than the value of imports. This implies that there is a net inflow of foreign currency, which can be used for investment purposes. Therefore, net foreign investment must be positive as well. The balance on the financial account may or may not equal the balance on the current account, as there can be other inflows and outflows of currency for purposes such as portfolio investment or foreign aid. The size of domestic private or public saving compared to net foreign investment is not directly related to the net export surplus. Investment does not need to equal domestic savings, as there can be other sources of funding for investment.

If Canada Has a Net Export Surplus, Which of the Following