Question

During some year a country had exports of $50 billion, imports of $70 billion, and domestic investment of $100 billion. What was its saving during the year?
a. $150 billion
b. $100 billion
c. $120 billion
d. $80 billion

Answer 1

To find the saving in the country, we can use the following relationship based on the national income accounting identity:

\[
Savings = Domestic Investment - (Exports - Imports)
\]

We have:
- Exports (X) = $50 billion
- Imports (M) = $70 billion
- Domestic Investment (I) = $100 billion

First, calculate the net exports (NX):

\[
NX = Exports - Imports = 50 - 70 = -20 \, \text{billion}
\]

Now we can plug this into the savings equation:

\[
Savings = I - NX
\]
\[
Savings = 100 - (-20)
\]
\[
Savings = 100 + 20 = 120 \, \text{billion}
\]

Thus, the saving during the year was:

**c. $120 billion**