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Suppose that in a small island economy household savings are S = 15% of GDP, private investment is I = 10% of
Suppose that in a small island economy household savings are S = 15% of GDP, private investment is I = 10% of
GDP, public sector spending is G = 21% of GDP, transfers are Z = 1% of GDP, interest payments on public debt are INT = 1% of GDP and private consumption is C = 70% of GDP. What is the vaule of its current account balance?
(a) current account surplus of 1% or GDP.
(b) current account surplus of 0% or GDP.
(c) current account deficit of 1% or GDP.