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Which of the following is NOT true about this national income equation: S + (T - G) = I + CA A) For the current account,...

Which of the following is NOT true about this national income equation: S + (T - G) = I + CA
A) For the current account, CA, to improve, we may have to invest less than otherwise would be the case.
B) For the current account, CA, to improve, we may have to save less to maintain the same amount of investment that includes foreign saving.
C) For the current account, CA, to improve, the government may have to run budget surplus.
D) A reduction in the trade deficit with one country will simply show up as an increase in a trade deficit with another country.

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Answer #1

Option (D).

A reduction in trade deficit with one country does not mean increase in trade deficit with another country. When trade deficit with one country decreases, capital account surplus with that country increases.

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