Question: Initially, there is a trade surplus in a small open economy with perfect capital mobility. Suppose the government expenditure decreases. Which of the following statement

Initially, there is a trade surplus in a small open economy with perfect capital mobility. Suppose the government expenditure decreases. Which of the following statement is correct?

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

NCO increases.

NCO remains unchanged.

NCO decreases.

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