If private saving equals private investment and there is a trade deficit, there must be ________; this is called ________.

Question

Quizplus · Accepted Answer

When private saving equals private investment and there is a trade deficit, it implies that the government is borrowing to finance the deficit, leading to a government budget deficit. This situation is referred to as the "twin deficits" hypothesis, where both the trade and budget deficits occur simultaneously.

If Private Saving Equals Private Investment and There Is a Trade