Reducing a current account surplus 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

Increasing the government's deficit (which means the government spends more than it earns) and increasing private investment relative to saving both inject more money into the economy. This can lead to increased imports due to higher domestic demand, which in turn can reduce a current account surplus by increasing the value of imports relative to exports.

Reducing a Current Account Surplus Requires a Country to