If national saving decreases,
A)the sum of domestic investment and net exports must increase.
B)the sum of domestic investment and foreign investment must increase.
C)the sum of domestic investment and foreign investment must decrease.
D)foreign investment must increase to cover the loss.
E)both public and private savings must be falling.

Question

Quizplus · Accepted Answer

When national saving decreases, it means there is less domestic capital available for investment. Since national saving is a source of funding for domestic investment and foreign investment (capital flowing out of the country), a decrease in national saving reduces the total funds available for both, leading to a decrease in the sum of domestic and foreign investment.

If National Saving Decreases