If there is a trade deficit, then A)saving is greater than domestic investment and Y C + I + G. B)saving is greater than domestic investment and Y C +I + G. D)saving is less than domestic investment and Y

Question

If there is a trade deficit, then A)saving is greater than domestic investment and Y > C + I + G. B)saving is greater than domestic investment and Y < C + I + G. C)saving is less than domestic investment and Y > C +I + G. D)saving is less than domestic investment and Y < C + I + G.

Quizplus · Accepted Answer

A trade deficit means that the country is importing more than it is exporting. This leads to an outflow of money, resulting in a decrease in the country's saving. As a result, saving is less than domestic investment, which is equal to Y - C - G + net exports (which is negative for a trade deficit). Therefore, Y < C + I + G. Option D is the correct choice.

If There Is a Trade Deficit, Then