Can a country have high investment if it doesn't not have a high rate of domestic...

Can a country have high investment if it doesn't not have a high rate of domestic savings? Please explain.

Solutions

Expert Solution

The national savings and investment identity is based on the total quantity of financial capital being demanded and supplied .

Investments could be high even when the domestic savings is less. As we know that investments could be from both domestic and foreign savings where domestic savings include both government and private savings . The equation is given by

I+(G-T)= S+(M-X)

where the left side of the equation explains the investments ie the ones done by private sector and (G-T) being the government borrowings .

Whereas the right side shows S which is savings and (M-X) is the inflow of foreign capital from foreign investors.

If the domestic investments are more than the domestic savings , it implies that the capital is being inflowed from sources other than the domestic savings.

Hence a country can have a higher investments even when the domestic savings are low because of inflow of capital from abroad.

(You can comment for doubts )

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

How can the US simultaneously finance a high level of domestic investment and have a large...

How can the US simultaneously finance a high level of domestic investment and have a large budget deficit and low private savings? Justify and explain your answer using equations from class.

Which is worse for a country: a high inflation rate or a high unemployment rate? Cite...

Which is worse for a country: a high inflation rate or a high unemployment rate? Cite at least two pieces of evidence to support your opinion. Attachments Skills 1. Identify patterns of inflation. 2. Analyze economic benefits and challenges of inflation.

Scientists have identified that the rate of deaths in a country can be correlated to the...

Scientists have identified that the rate of deaths in a country can be correlated to the density of the population (#people/area), the average age and weight of the population, the average work commute and he net mass flow rate of people in & out of the country. (a) Apply dimensional analysis to this problem and find the minimal number of dimensionless groups needed to describe and understand the available data. (b) Discuss the findings and what conclusion may be drawn...

Why is a high unemployment rate not good for the country?

South Africa is a country with high unemployment rate. Some researchers have suggested that the South...

South Africa is a country with high unemployment rate. Some researchers have suggested that the South African government should adopt expert-led growth policies to address this problem given that increasing exports has the potential to increase productivity. Should the South African government increase its economic openness without government regulation of any kind? Please help me there. There is an answer to this question in this app. But I cant view it

The saving rate (gross domestic saving as a % of GDP) in Singapore, a small open economy, was 48% in 2017 while the investment rate (domestic investment as a % of GDP) was 25%.

Explain whether the given statement is true, false or uncertain. Start your answer by selecting one of the options – “True”, “False” or “Uncertain” and then provide arguments to justify your selection (be brief and concise and present your arguments in 100 or less words). You need to ensure your assumptions are clear, reasonable and explicit if making any.Question:The saving rate (gross domestic saving as a % of GDP) in Singapore, a small open economy, was 48% in 2017 while...

The J - curve explains that depreciation lowers the domestic interest rate and hence will lead to an increase in domestic consumption and investment.

The J - curve explains that depreciation lowers the domestic interest rate andhence will lead to an increase in domestic consumption and investment. Do youagree? Explain.

1. A country has $20 million of domestic investment and net capital outflow of $10 million....

1. A country has $20 million of domestic investment and net capital outflow of $10 million. What is saving? show work 2. If a dollar currently purchases 10 pesos and someone forecasts that in a year it will be 11 pesos, then the forecast is given in nominal terms and implies the dollar will _____appreciate____________(Appreciate/Depreciate). 3. A U.S. purchase of oil from overseas paid for with foreign currency it already owned _________(increases/decreases) U.S. net exports, and ______________(increases/decreases) U.S. net capital...

5. If a country runs a current account surplus and national private savings equals domestic investment,...

5. If a country runs a current account surplus and national private savings equals domestic investment, then the combined governmental accounts must be ________. A) balanced B) in deficit C) in surplus D) could be either negative or positive, depending on the capital account. 6. For an economy, if its national saving is greater than its domestic investment, then which of the following is true? A) this economy must have a current account surplus. B) this economy must have a...

If a country chooses to have a monetary policy oriented toward domestic goals and the freedom...

If a country chooses to have a monetary policy oriented toward domestic goals and the freedom of international capital movements, then it could have a floating exchange rate. Why is this the case? How would a fixed exchange rate compare to it instead?

Subjects