Statement I: Our high rate of savings has contributed to the huge trade deficit of the last 20 years.
Statement II: Both increasing savings and investment would help reduce the U.S.trade deficit.

Question

Quizplus · Accepted Answer

Statement I is false because high savings actually contribute to a surplus in the Capital Account, which then leads to a deficit in the Current Account (which includes trade). Statement II is true because increasing investment can lead to higher domestic production, which can reduce the trade deficit.

Statement I: Our High Rate of Savings Has Contributed to the Huge