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4 May, 22:39

A country implements policies that are expected to increase taxes by €100 million, increase government spending by €50 million, and reduce investments and private sector savings by €25 million each.

As a result, the country's current account balance will most likely:

A. increase by €50 million.

B. decrease by €50 million.

C. increase by €100 million.

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  1. 4 May, 22:51
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    A) Increase by 50 million

    Explanation:

    A is correct.

    Below is the current account balance calculation

    CA = Sp - I + (T-G - R)

    CA stands for Current account balance

    Sp stands for Private sector savings

    I is Investments, T = Taxes

    G represents government spending's, whereas R = Transfers

    CA = - 25 - (-25) + (100-50-0) = 50, increase by 50 million euro
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