If national saving decreases
A)the sum of domestic investment and net exports must increase.
B)the sum of domestic investment and foreign investment must increase.
C)the sum of domestic investment and foreign investment must decrease.
D)foreign investment must increase to cover the loss.

Question

Quizplus · Accepted Answer

National saving is equal to the sum of domestic investment and net exports plus government saving. If national saving decreases, then either domestic investment or net exports or government saving or a combination of these must also decrease. If net exports and government saving are held constant, then the sum of domestic investment and foreign investment must decrease since national saving is used to finance both domestic and foreign investment.

If National Saving Decreases