True or False?
The statement is true. An increase in saving in one of the countries will lead to a rightward shift of that country' s savings function and, since the country is big, a rightward shift of the world savings function. The world interest rate will fall leading to an increase in investment in both countries and, hence, the world as a whole.
Saving will increase relative to investment in the country whose savings function shifted to the right and investment will increase relative to saving in the country whose savings function did not shift. This will increase the net net capital outflow, or reduce the net capital inflow, of the country whose savings function shifted to the right.