Section 19, Econ Problem #6
Based on the information provided by the sell-side Analyst for Bricania’s trade, private sector, and gov expenditures, including Exhibit 1, which of the following satements is most likely correct:
Gov expense for defense, public structures: 4500
Net tax receipts: 12,387
Surplus (deficit): (2,286)
Private Sector Savings: 11,398
Private Sector Investment: 12,265
Surplus (deficit): (867)
Surplus (deficit): 3,153
Answer: Bricania’s (country) international borrowing is financing private and public investment, not consumption. Goverment plus private investment (4500 + 12265) total more than net internation borrowing of 3,153. Net international borrowing is equal to the current account deficit (imports less exports) because the official settlements account balance is zero.
How did they draw this conclusion that international borrowing is financing private and public investment and not consumption?