i) Do current account de cits necessarily indicate problems in the economy?

(a) Yes, a de cit is always a bad thing.

(b) Yes, current account de cits are always caused by government budget de cits.

(c) No, a current account de cit can come from an increase in domestic investment opportunities.

(d) No, current account de cits are never caused by problems in the economy such as low savings rates.

ii) Which of the following is true for a closed economy with regard to savings and investment?

(a) S > I

(b) S < I

(c) S ≤ I

(d) S = I