There is an intimate relationship between a country's BCA and how the country finances its domestic investment and pays for government expenditures. Given this, which of the following is a true statement?
A)If (S - I)

Question

There is an intimate relationship between a country's BCA and how the country finances its domestic investment and pays for government expenditures. Given this, which of the following is a true statement?
A)If (S - I) < 0, it implies that a country's domestic savings is insufficient to finance domestic investment.
B)If (T - G) < 0, it implies that a country's tax revenue is insufficient to finance government spending.
C)both a and b are true
D)none of the above

Quizplus · Accepted Answer

Option A is true as (S-I) represents savings-investment surplus/deficit, and if this value is negative, it means that the country's domestic savings are not sufficient to finance its domestic investment. 
Option B is also true as (T-G) represents fiscal surplus/deficit, and if this value is negative, it implies that the country's tax revenue is insufficient to finance government spending. Therefore, both options A and B are true.

There Is an Intimate Relationship Between a Country's BCA and How