Suppose, the U.S.has domestic savings of $100 billion, domestic investment of $60 billion, and a government budget surplus of $30 billion.Based on these figures, the amount of net foreign investment is $_____ billion.

Question

Quizplus · Accepted Answer

Net foreign investment= Savings-Investment-Government budget surplus 
= $100 billion - $60 billion - $30 billion 
= $10 billion 
Since net foreign investment refers to the amount of foreign investments in the domestic economy minus the domestic investments by foreigners, we have to add a negative sign to the above result. Therefore, the net foreign investment is -$10 billion. However, the question asks for the absolute value of the net foreign investment, which is $10 billion. 
Therefore, $10 billion in negative foreign investment (-$10 billion) plus the government budget surplus of $30 billion gives a positive net foreign investment of $70 billion.