Answer to Question #89587 in Macroeconomics for Delphine

Question

Can a nation fund its investments at a level higher than that currently provided by its income

Answer 1

Yes, a nation can finance its investment at a higher level.

for this, savings must be turned into investments. By savings, I mean the money that people keep at home or on current accounts in banks.

In addition, the nation can attract foreign investment. To attract foreign investment, the expected return on investment must be higher than in other countries, the risk of investment is lower, legislation must be developed that complies with the world policies that foreign investors will understand, the government can stimulate external investment by providing various tax benefits.

At the same time, external financing has its downsides.