*A government finds itself in the following situation: a government budget deficit of $900; total domestic savings of $2000, and total domestic physical capital investment of $1300. According to the national saving and investment identity, if investment increases by $200 while the government budget deficit decreases by $100 and savings remain the same, what will happen to the current account balance?
A. current account becomes 0
B. deficit increases from $200 to $400
C. deficit decreases from $200 to $100
D. deficit increases from $200 to $300
Answer:D
*A government finds itself in the following situation: a government budget deficit of $900; total domestic savings of $2000, and total domestic physical capital investment of $1300. According to the national saving and investment identity, if investment increases by $200 while the government budget deficit decreases by $100 and savings remain the same, what will happen to the current account balance?
A. current account becomes 0 B. deficit increases from $200 to $400 C. deficit decreases from $200 to $100 D. deficit increases from $200 to $300
Explanation: Type: Multiple Choice