Question

An open economy1) _______ A) can save only by building up its capital stock. B) can save only by acquiring foreign wealth. C) cannot save either by building up its capital stock or by acquiring foreign wealth. D) can save either by building up its capital stock or by acquiring foreign wealth. E) can save by avoiding excessive imports.

Answer 1

Answer:

The correct answer is letter "D": can save either by building up its capital stock or by acquiring foreign wealth.

Explanation:

An open economy is considered one that commercially interacts with other economies abroad. It implies buying and selling goods or financial assets with the rest of the economies in the world. Open economies increase their investment possibilities since they are open to the world's financial system.  

In open economies saving and investment are not considered the same. In fact, savings are considered the result of adding investments and capital. This type of economies saves by increasing capital stock and acquiring foreign wealth.