What happens to the current account (CA) if there were a reduction in the budget deficit?...
What happens to the current account (CA) if there were a reduction in the budget deficit? Explain taking into consideration possible changes in investment and private savings.
Homework Answers
The current account concerns the export and import of the country. In other words, it can be expressed as the difference between saving and investment.
Current account = Saving - Investment.
Fall in the saving leads to the deterioration of the current account situation in the economy.
Thus, when budget deficit declines for country, there will be rise in saving. Rise in the saving will improve the current account situation of country.
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