Question

What does economic theory suggest is the long run relationship between changes in a country’s level of savings and its level of investment? Explain how your answer depends upon whether or not the economy is open or closed.

Answer 1

ANSWER :-

☆There exists a since quite a while long run connection between changes in a country's level of reserve funds and level of investment in the economy.

●On the off chance that the economy is closed, at that point increment in the level of reserve funds in the economy, diminishes the pace of enthusiasm for the economy and as the pace of intrrest diminishes in the economy, the level of investment  increments over the long run.

●Therefore, when the economy is closed , at that point increment in the country's level of reserve funds builds the level of investment in the economy.

●Then again, if there should be an occurrence of an open economy, as the level of reserve funds expands more than the level of investment.

●At that point net capital outpouring from the economy happens to put resources into different countries  with a higher pace of enthusiasm than pace of enthusiasm for the country of origin so as to gain higher benefits.

●In this way, in an open economy, capital outpouring happens in the economy.

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