Which of the following equations is true in an open economy?
A)Private saving = net foreign investment + domestic investment.
B)Domestic saving = net capital flows.
C)Net exports = -Financial account balance.
D)Net exports = net foreign investment.
E)Investment = national saving.

Question

Quizplus · Accepted Answer

In an open economy, net exports (the value of a country's exports minus its imports) are equal to net foreign investment (the purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners). This relationship highlights how a country's trade balance (net exports) is directly linked to its financial investments abroad.

Which of the Following Equations Is True in an Open