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12 The notation we are familiar with is Y = national income C = consumption I = private investment G = government spending X =
12 The notation we are familiar with is Y = national income C = consumption I = private investment G = government spending X = exports M = imports T = taxes There is an intimate relationship between a country's CA balance and how the country finances its domestic investment and pays for government expenditures. This relationship is given by CA X M (S I) + (T G). Given this, in order for a country to reduce a BCA deficit, which of the following must occur? a. For a given level of S and I, the government budget deficit (T G) must be reduced. b. For a given level of S and (T G), I must fall. c. For a given level of I and (T G), S must be increased. d. All of the options would work to reduce a CA deficit
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