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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

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.

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?

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