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Budget Deficit Query!
Que - If the government is running a budget deficit, which of the following relationships are least likely to occur in the economy at the same time?
Exports relative to imports; Savings relative to investment
A) exports B) exports imports; private savings C) exports private investment
The correct answer was B) exports imports; private savings
My understanding is in the equation: (G-T) = (S-I) - (X-M), if there is a budget deficit which means G-T 1) either (S-I) 2) or S-I 0
We can definitely rule option A out but how can we rule option C out here? In fact, B is most likely to occur if there is budget deficit as described in 2) above, isn’t it? |
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