Chapter 22, Problem 6MCQ

To determine

The correct option for basic accounting fact that the level of investment for the economy as a whole.

Answer to Problem 6MCQ

From the available options, the correct option is saving.

Explanation of Solution

The basic accounting fact shows that the level of investment for the whole economy must be equal to the level of saving because investments are financed or made from savings.

Therefore, the correct option is e (savings) and all other options are incorrect because capital inflows and outflows do not finance the investment. And, wealth and financial assets are not in liquid form of finance that cannot always be used for investment.

Economics Concept Introduction

Introduction: Financial system refers to a set of financial institutions that offers the exchange of funds, insurance, and deposits such as banks, insurance companies, etc.