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Homework answers / question archive / Answer true or false: The saving rate (gross domestic saving as a % of GDP) in Singapore, a small open economy, was 48% in 2017 while the investment rate (domestic investment as a % of GDP) was 25%
Answer true or false:
The saving rate (gross domestic saving as a % of GDP) in Singapore, a small open economy, was 48% in 2017 while the investment rate (domestic investment as a % of GDP) was 25%. As a result, there was a net outflow of capital from Singapore in 2017.
Savings rate represents the % of GDP which the population has not expended on consumption and has kept for the unforeseen circumstances.
Investment rate means the amount which has been invested in the domestic assets of the country.
It is important to have an equilibrium between the savings rate and investment rate to protect the net flow of capital.
Flow of capital is the difference between savings and investment. If the savings is higher than the investment, this means there is net outflow of capital and vice-versa.
Given that the savings rate was 48% and investment rate was 25%, which means that savings was higher than the investment resulting in outflow of capital.
Hence the given statement is true.
