Question
Because of a sharp decline in real estate values, the household sector has increased the fraction of disposable income that it saves. If output and
Because of a sharp decline in real estate values, the household sector has increased the fraction of disposable income that it saves. If output and investment spending remain unchanged, which of the following is most likely?
A. A decrease in the government deficit.
B. A decrease in net exports and increased capital inflow
C. An increase in net exports and increased capital outflow
Please provide a thorough explanation that includes how the relationship between the household sector, government sector, firms, and net exports are related to the question in the explanation.
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