Copper accounts for a large percent of Chilean exports. Figure 6 in this linkedpaper(link appears right before this bracket) shows the large increase in the spot price of copper during the 2000s, as well as future forecasts of the price of copper at different points of time. What does our theory of current account determination say should have happened to the CA between 2003 and 2007?

Select one:

Since agents perceived this increase in the price of copper as temporary, CA should have deteriorated

Since agents perceived this increase in the price of copper as permanent, CA should have deteriorated.

Since agents perceived this increase in the price of copper as temporary, CA should have increased

Since agents perceived this increase in the price of copper as permanent, CA should have increased.

CA should have deteriorated regardless of agents expectations, since what counts for our model is the true ex post price realization