Question: Consider a situation where Kuwait has a current account deficit. What can you conclude about Kuwaits levels of domestic savings, domestic investment, international capital flows,

  1. Consider a situation where Kuwait has a current account deficit.
    1. What can you conclude about Kuwaits levels of domestic savings, domestic investment, international capital flows, and their capital account?
    2. Assuming that Kuwait has a floating exchange rate and perfect capital mobility, how would a decrease in the level of Kuwaiti savings impact their balance of payments?

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