Country A has a trade deficit of $200 billion, private domestic savings of $500 billion, a government deficit of $200 billion, and private domestic investment of $500 billion.

Suppose all of the trade deficit in Country A comes from international trade with Country B. Now Country B’s economy is undergoing some structural changes and its domestic saving rate is declining. How would this change in Country B affect Country A?

 

Answer rating: 100% (QA)

The savings and investment for trade deficit formul... View the full answer