If domestic investment in an economy is smaller tha the economy\'s private domes

Question

If domestic investment in an economy is smaller tha the economy's private domestic savings
A. There must be a surplus B. There must be gov budget surplus C. Taxes must be less than gov expenditure D. None of above If domestic investment in an economy is smaller tha the economy's private domestic savings
A. There must be a surplus B. There must be gov budget surplus C. Taxes must be less than gov expenditure D. None of above
A. There must be a surplus B. There must be gov budget surplus C. Taxes must be less than gov expenditure D. None of above

Explanation / Answer

The answer is B. According to Keynes, i+g+x=s+t+m
If i>s, i -s= positive, then t-g must be positive, or government budget surplus, while m-x could be zero or positive too, or a trade deficit.

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