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?

Question

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