CFA Level I · CFA Level I Exam · International Trade
A country's national saving is less than its domestic investment. This situation is most likely associated with a:
This situation is most likely associated with a current account deficit. The current account balance equals national saving minus domestic investment, so when saving falls short of investment the balance is negative and the shortfall is financed by foreign capital inflows.
- Acurrent account deficitCorrect
- Bcurrent account surplus
- Cbalanced current account
Explanation
The current account balance equals saving minus investment (S − I). When saving is below investment, S − I is negative, so the country runs a current account deficit and must borrow from abroad to fund the gap.
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