a) 3 marks Define national, private and public saving rates. (b) 2 marks Explain how national saving rate, investment and net exports are related. (c) 6 marks Currently, the United States of America runs current account deficits. At the same time, China runs current account surpluses. Use the relationship in (b) to discuss the reasons for such current account imbalances. What would two countries have to do to improve their current account positions? (d) 6 marks In order for the current account to move, the real exchange rate has to adjust. Explain the relationship between the current account and the real exchange rate. What are the roles of the nominal exchange rate and prices for such an adjustment? How does the real exchange rate adjust if the nominal exchange rate is fixed? (e) 3 marks Consider US-China current accounts and the real exchange rate. What are the pressures on prices in USA and China, given that the nominal exchange rate is fixed? If the nominal exchange rate is flexible, what would have happen to the value of remnimbi?