When disaster strikes a country and destroys infrastructure and businesses, it is likely that:
A) savings will decline and the current account will move into a surplus.
B) the current account will move into a deficit.
C) investment will decline.
D) savings will decline and the current account will move into a deficit.

Question

Quizplus · Accepted Answer

When a disaster strikes a country and destroys infrastructure and businesses, savings are likely to decline as individuals have to use their savings to meet their immediate needs. This causes a decrease in the supply of savings and an increase in demand for foreign goods, leading to a decrease in the current account balance and causing it to move into a deficit. Investment is also likely to decline as businesses may not have the resources to rebuild or expand.

When Disaster Strikes a Country and Destroys Infrastructure and Businesses