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Problem 1 (Balance of Payments, 20%) Before the 2008 global economic crisis, one of the most serious economic problems in the American economy was that
Problem 1 (Balance of Payments, 20%) Before the 2008 global economic crisis, one of the most serious economic problems in the American economy was that of the twin deficits, an expression used to represent a situation in which the country simultaneously had a current- account deficit and fiscal deficit. 1. Based on the national account identities, show how these deficits are related. 2. As mentioned in class, it may be misleading to address the current account deficit using the national account identities. However, under what condition can we use the identi- ties to discuss the determinants of current account deficit
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