Figure 13.4. Canadian Economy Under a Fixed Exchange Rate System

-Refer to Figure 13.4.Starting at equilibrium income $100 billion,where (S - I)? intersects (X - M)?,an autonomous decrease in saving of $10 billion leads to a $20 billion increase in income and a trade deficit of $5 billion.

Question

Figure 13.4. Canadian Economy Under a Fixed Exchange Rate System
 
-Refer to Figure 13.4.Starting at equilibrium income $100 billion,where (S - I)? intersects (X - M)?,an autonomous decrease in saving of $10 billion leads to a $20 billion increase in income and a trade deficit of $5 billion.

Quizplus · Accepted Answer

According to the graph, an autonomous decrease in saving leads to an increase in income and a trade deficit. Specifically, a $10 billion decrease in saving leads to a $20 billion increase in income and a trade deficit of $5 billion. This is reflected in the intersection of the savings-investment balance (S-I) and the exports-imports balance (X-M) in the graph. Therefore, the statement is true.

Figure 134