Imagine a world with two large countries, the US and China. The US has a current account deficit with China which leads to China having a large current account surplus with the US. When the US runs a current account deficit, its purchases of goods and services from China exceed its sales of goods and services to China. At the same time, the US is necessarily selling assets to China, net of its purchases of assets in China, in an amount equal to the current account deficit. Consequently, as current account deficits have accumulated over time, the net international investment position of the United States-the difference between U.S.-owned assets abroad and foreign-owned assets in the United States-has also grown ever larger. Evaluate how the US's macroeconomic policies affect the China. Compare the small and the large country cases; consider both permanent monetary and fiscal policies. Imagine a world with two large countries, the US and China. The US has a current account deficit with China which leads to China having a large current account surplus with the US. When the US runs a current account deficit, its purchases of goods and services from China exceed its sales of goods and services to China. At the same time, the US is necessarily selling assets to China, net of its purchases of assets in China, in an amount equal to the current account deficit. Consequently, as current account deficits have accumulated over time, the net international investment position of the United States-the difference between U.S.-owned assets abroad and foreign-owned assets in the United States-has also grown ever larger. Evaluate how the US's macroeconomic policies affect the China. Compare the small and the large country cases; consider both permanent monetary and fiscal policies