Question

A country finds itself in the following situation: a government budget deficit of $800; total domestic savings of $1800, and total domestic physical capital investment of $1300. According to the national saving and investment identity, what is the current account balance?

Answer 1

$300 deficit

Step-by-step explanation:

As we know that,

Export - Import = Private savings + (Taxes - government spending) - investment

Export - Import = $1,800 + ($0 - $800) - $1,300

Export - import = $1,800 - $800 - 1,300

Export - import = $1,800 - $2,100

Export - Import = - $300

The export - import = current account balance

So, it is a $300 deficit