Question
3. Country A has a trade deficit of $200 billion, private domestic savings of $500 billion, a government deficit of $200 billion, and private domestic
3. Country A has a trade deficit of $200 billion, private domestic savings of $500 billion, a government deficit of $200 billion, and private domestic investment of $500 billion. a) To reduce the $200 billion trade deficit by $50 billion, by how much does Country As private domestic savings have to increase? b) Suppose all of the trade deficit in Country A comes from the international trade with Country B. Now Country Bs economy is undergoing some structural changes and its domestic saving rate is declining. How would this change in Country B affect Country A?
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