There is an intimate relationship between a country's BCA and how the country finances its domestic investment and pays for government expenditures.This relationship is given by BCA $\equiv$ X - M $\equiv$ (S - I)+ (T - G).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.This relationship is given by BCA  $\equiv$ X - M  $\equiv$ (S - I)+ (T - G).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)When BCA is negative, it implies that government budget deficits and/or part of domestic investment are being finance with foreign-controlled capital.
D)All of the above are true

Quizplus · Accepted Answer

All of the options are true:
A) If (S - I) < 0, it means that a country has to borrow from foreign countries or reduce its domestic investments to finance government expenditures.
B) If (T - G) < 0, it means that the government has to borrow from foreign countries or reduce its spending to maintain budget balance.
C) A negative BCA indicates that the country is importing more than it is exporting, which means that it is relying on foreign capital to finance its government budget deficits and/or domestic investment.

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