Question

The large, positive net capital outflow in Canada after 1999 is primarily the result of government budget surpluses.

TRUE OR FALSE

In an open economy, Canadian national savings can be less than Canadian investment.

TRUE OR FALSE

Answer 1

1. The answer is true.

• The large, positive net capital outflow in Canada after 1999 is primarily the result of government budget surpluses.
• When income exceeds over expenditures, then it is said to be a budget surplus. After 1999, Canada has witnessed a positive yet large capital outflow as a result of governement budget surpluses. Budget surplus shows the effective managing capabilities of a government. It takes proper planning and implementation of policies to make a budget surplus happen in a country.

2. The answer is true .

• In an open economy, Canadian national savings can be less than Canadian investment.
• Open economies are mostly free from trade barriers and allows imports and export of goods and services with other countries. An open economy will allow domestic as well as international trade. A significant portion of such economy's GDP are contributed by the import and export activities. The resulting changes obtained from an open economy is in the form of investments. Thus, Canadian national savings can be less than Canadian investment.