Reducing a current account deficit requires a country to
A) increase the government's deficit and increase private investment relative to saving.
B) increase the government's deficit and decrease private investment relative to saving.
C) decrease the government's deficit and increase private investment relative to saving.
D) decrease the government's deficit and decrease private investment relative to saving.

Question

Quizplus · Accepted Answer

Decreasing a current account deficit often involves reducing domestic consumption and increasing savings. Decreasing the government's deficit (which reduces public sector borrowing) and decreasing private investment relative to saving (which increases national savings) can help achieve this by making more funds available domestically, reducing the need for foreign capital and thus improving the current account balance.

Reducing a Current Account Deficit Requires a Country to