Last Year a Country Had $700 Billion of Saving and $900

question 106

Essay

Last year a country had $700 billion of saving and $900 of investment. This year it had $1000 billion of saving and $800 billion of investment. By how much did net capital outflow change? By how much did net exports change? How is it possible for a country to have saving that is greater than investment?

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Definitions:

Diversifiable Risk

The portion of investment risk that can be reduced or eliminated through diversification in an investment portfolio.

Unique Risk

Another term for diversifiable risk, emphasizing the idea that this risk is specific to an individual investment and not the market as a whole.

Systematic Risk

The risk inherent to the entire market or market segment, also known as market risk, which cannot be eliminated through diversification.

Capital Allocation Line

A line on a graph that shows the rates of return of portfolios that optimally combine risk and return for an investor.