QUESTION I Variable Definition GDP Gross domestic product GNP Gross national product C Consumption expenditures Investment expenditures G Government expenditures on goods and services X Exports of goods and services M Imports of goods and services CA Current account balance S Private savings (savings of households and firms) T Net taxes, or taxes paid minus transfer payments received 1 . Using the variables above illustrate how the expenditure and income components of GNP can be rearranged so as to identify the macroeconomic relationship between the current account; investment; and public and private savings. Explain how a country's saving (private and public) can be applied to fund domestic and/or foreign investment. (15 points) ii. What does the existence of a current account deficit imply about a country's net capital inflow? Do you consider a current account deficit an economic problem? (Explain) (10 points)