Question: Initially, there is a trade deficit in a small open economy with perfect capital mobility. Suppose an investment tax credit is introduced to give a

Initially, there is a trade deficit in a small open economy with perfect capital mobility. Suppose an investment tax credit is introduced to give a tax advantage to any firm building a new factory or buying a new piece of equipment.Which of the following statement is correct?

NCO increases.

NCO remains unchanged.

NCO decreases.

It does not have sufficient information to conclude whether NCO increases, stays the same, or decreases.

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