Answer to Question #115973 in Macroeconomics for Esther

Question

An increase in private saving which is accompanied by an equivalent increase in exports would increase the domestic investment.True or false? Explain

Answer 1

Exports play an important role in any nation's economy. If the level of export is greater than that of imports into a country, it leads to an increase in the nation's economy, values of its currency, and the level of domestic investment (people are willing to establish more factories in the country). When a company is exporting a high level of goods, this also equates to a flow of funds into the country, which stimulates more spending.

An increase in a country's currency can have a huge impact on the everyday life of a country's citizens, thereby leading to an increase in saving, more domestic investment and more money in circulation. It is known that the value of a country's currency is a one of the biggest determinants of a nation’s economic performance, and its gross domestic product.

The importing and exporting activity of a country can influence a country's GDP, its exchange rate, interest rates, and its level of inflation.