The notation is Y = GNP = national income
C = consumption
I = private investment
G = government spending
X = exports
M = imports
T = taxes
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 ≡ X − M ≡ (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) If (S − I) < 0, it implies that a country's domestic savings is insufficient to finance domestic investment and if (T − G) < 0, it implies that a country's tax revenue is insufficient to finance government spending.
D) none of the options
Correct Answer:
Verified
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