If we observe an economy in which desired saving has changed,but there has been no change in actual investment,we may infer that ________.
A)net exports have changed
B)actual saving has changed
C)the domestic real interest rate has not changed
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

When desired saving changes without a change in actual investment, it implies adjustments elsewhere in the economy to maintain equilibrium. Net exports may adjust as savings flow abroad or are used domestically in different ways, actual saving adjusts to match investment (since investment hasn't changed, saving must adjust to match it), and the domestic real interest rate may change to balance saving and investment, affecting net exports and saving behavior.

If We Observe an Economy in Which Desired Saving Has