In an Economy Where Net Exports Are Zero, If Saving

question 185

Multiple Choice

In an economy where net exports are zero, if saving rises in some period, then in that period

• A)consumption and investment fall.
• B)consumption falls and investment rises.
• C)consumption rises and investment falls.

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Definitions:

Risky Asset

Asset that provides an uncertain flow of money or services to its owner.

Risk-free Asset

A financial instrument that is considered to have minimal risk of financial loss, such as government bonds.

Intercept

A term in mathematics and economics indicating the value where a function or line crosses an axis on a graph.

Budget Line

A budget line represents the combinations of two goods that a consumer can purchase with a given income and prices, illustrating the trade-off between the two goods.