*A country finds itself in the following situation: a government budget deficit of $900; total domestic savings of $200, and total domestic physical capital investment of $1300. According to the national saving and investment identity, if investment decreases by $300 while the government budget deficit and savings remain the same, what will happen to the current account balance?
A. $200 deficit changes to $100 surplus
B. surplus increases from $200 to $500
C. $200 surplus changes to $100 deficit
D. deficit decreases from $900 to $600
Answer:A
*A country finds itself in the following situation: a government budget deficit of $900; total domestic savings of $200, and total domestic physical capital investment of $1300. According to the national saving and investment identity, if investment decreases by $300 while the government budget deficit and savings remain the same, what will happen to the current account balance?
A. $200 deficit changes to $100 surplus B. surplus increases from $200 to $500 C. $200 surplus changes to $100 deficit D. deficit decreases from $900 to $600
Explanation: Type: Multiple Choice