Other things the same, which of the following would induce a trade deficit?
A)a decline in saving, but not a rise in investment
B)a rise in investment, but not a decline in saving
C)both a decline in saving and a rise in investment
D)neither a decline in saving nor a rise in investment

Question

Quizplus · Accepted Answer

If there is a decline in saving and a rise in investment, this would lead to an increase in domestic consumption and investment demand, leading to an increase in imports and a trade deficit. Option A is incorrect because a decline in saving could be offset by a rise in investment, which would increase domestic production and possibly increase exports, leading to a trade surplus. Option B is incorrect because a rise in investment could result in an increase in domestic production and exports, leading to a trade surplus. Option D is incorrect because if there is no change in saving or investment, there would be no significant impact on international trade.

Other Things the Same, Which of the Following Would Induce