Suppose that the economy is in equilibrium with the government budget is in deficit and with saving is less than investment.According to the circular flow model,
A)imports must exceed exports
B)imports must be less than exports
C)imports must equal exports
D)imports could be less than or equal to exports
E)it is impossible to determine anything about imports and exports with the given information

Question

Quizplus · Accepted Answer

When the government budget is in deficit and saving is less than investment, the economy is borrowing from abroad, which typically means that imports exceed exports to finance the deficit.

Suppose That the Economy Is in Equilibrium with the Government