What do economists mean when they say that countries may save in the form of foreign wealth? Select one – the most appropriate answer.

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Question restatement: What do economists mean when they say that countries may save in the form of foreign wealth? Select one – the most appropriate answer.

Option A: Countries saving may exceed their investment.
This describes a situation where national saving is greater than domestic investment, which can lead to a current account surplus and potentially accumulate foreign assets, but it focuses on the relationship between saving and investment rather than the mechanism of holding foreign wealth itself. It’s related, but not the most direct description of “saving in the form of foreign wealth.”

Option B: Countries can invest more than they save.
This implies that a country borrows from abroad to fund investment, i.e., foreign wealth is acquired by others lending to it. That is the opposite of saving in foreign wealth; it represents drawing on foreign funds rather than accumulating foreign assets, so it’s not the correct interpretation here.

Option C: Countries may export more goods and services than they import.
This is a direct way to reflect a current account surplus, which corresponds to lending to the rest of the world and accumulating foreign financial assets—i.e., saving in the form of foreign wealth. When a country sells more abroad than it buys, it accumulates claims on foreign assets, which economists often describe as saving abroad or holding foreign wealth. This aligns with the intuitive idea of turning saving into ownership of foreign wealth via net lending.

Option D: Countries may import more goods and services than they export.
A trade deficit implies the opposite of a current account surplus, meaning the country is accumulating foreign liabilities rather than foreign assets. This does not illustrate saving in the form of foreign wealth, so it’s inconsistent with the concept.

Option E: No correct answer.
Since one option correctly captures the idea of saving abroad as accumulating foreign wealth (Option C), this choice is not appropriate.

Overall, the reasoning shows that the most appropriate description of saving in the form of foreign wealth is a trade surplus, where exports exceed imports, leading to net lending abroad and accumulation of foreign assets. The other options either describe related but not equivalent ideas, or describe the opposite scenario (borrowing from abroad or a trade deficit).

econ_420_120255_249094 Lesson 10 Quiz

What do economists mean when they say that countries may save in the form of foreign wealth? Select one – the most appropriate answer.

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