1.Imagine that the U.S. economy finds itself in the following situation:

a government budget deficit of $100 billion,

total domestic savings of $1,500 billion, and

total domestic physical capital investment of $1,600 billion.

a.(2 points)According to the national saving and investment identity, what will be the current account balance? Is it a trade deficit or trade surplus? Will international capital flow in or flow out?

b.(2 points)What will be the current account balance if investment rises by $50 billion, while the budget deficit and national savings remain the same?