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When there is a trade surplus, domestic savings are lower than domestic investment. Domestic savings determine the supply of financial capital but do not affect
When there is a trade surplus, domestic savings are lower than domestic investment. Domestic savings determine the supply of financial capital but do not affect the balance of trade. You can change one factor of the national saving and investment identity, while changing other factors one by one, to explore the effect on the trade deficit. When there's a trade surplus, extra financial capital has accumulated, and an outflow of financial capital to other economies is expected
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