Asked by Annisa Rahma Putri on May 14, 2024
Verified
Statement I: Our high rate of savings has contributed to the huge trade deficit of the last 20 years.
Statement II: Both increasing savings and investment would help reduce the U.S.trade deficit.
A) Statement I is true and statement II is false.
B) Statement II is true and statement I is false.
C) Both statements are true.
D) Both statements are false.
Savings Rate
The proportion of income that is saved rather than spent on goods and services.
Trade Deficit
Occurs when a country's imports exceed its exports during a given time period, leading to an outflow of domestic currency to foreign markets.
- Recognize the financial implications of having trade deficits and surpluses.
Verified Answer
AM
Arnold MatiasMay 15, 2024
Final Answer :
B
Explanation :
Statement I is false because high savings actually contribute to a surplus in the Capital Account, which then leads to a deficit in the Current Account (which includes trade). Statement II is true because increasing investment can lead to higher domestic production, which can reduce the trade deficit.
Learning Objectives
- Recognize the financial implications of having trade deficits and surpluses.