A particular economy has consumption of $400 million, a government deficit of $1

Question

A particular economy has consumption of $400 million, a government deficit of $100 million, taxes of $250 million, and income of $800 million. Which of the following statements must be true?

A. If investment is zero, there is no foreign trade imbalance.

B. If the trade surplus is $50 million, investment will be equal to $100 million.

C. If the capital account surplus is $50 million, investment will be equal to $100 million.

D. If the trade surplus is $100 million, there will be investment.

E. None of the above statements is necessarily true.

Explanation / Answer

Answer: E

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