In an economy open to international trade ________.
A)saving equals investment in equilibrium
B)saving is the difference between net exports and investment
C)saving equals investment as long as the economy has no exports
D)saving equals investment as long as NX=0
E)none of the above

Question

Quizplus · Accepted Answer

In an open economy, saving equals investment only if net exports (NX) is zero, since in that case there is no capital inflow or outflow from foreign countries. If there is a surplus in net exports, there will be a capital inflow resulting in higher investment, and if there is a deficit in net exports, there will be capital outflow resulting in lower investment. Therefore, option D is the correct answer as it states that saving equals investment as long as NX=0.

In an Economy Open to International Trade ________