Which of the following correctly states the saving and investment equation in an open economy?

A. I = S + NFI

B. S + I = NFI

C. S = I + NFI

D. I minus S = NFI If national saving declines and domestic investment does not change, it must be true that net foreign investment has increased stayed the same decreased.

Option C, S = I + NFI states the saving and investment equation in an open economy

Explanation:

The idea of savings and investment has two perspectives. One is known to have the "Keynesian" / National Accounts perspective on actual physical macroeconomic behavior. Another is the opinion of "monetarists," which refers to international economics.

S = I + NFI, in such an open economy, America can invest with domestic (I) or international equity (NFI) money if it spares a buck.

If the trade surplus of a nation is high, domestic investments will be more positive than domestic demand and international net investment. If a country operates a trade surplus, consumer spending (NX) would be negative, national investments would be less than domestic and international net investment (NFI) would be negative.

Where a country has reasonable trade, consumer spending is negative and domestic savings are low, with net foreign investment (NFIs) equivalent to domestic investments.