Question #228

When a country is running an external deficit and the national currency issuing government achieves a balanced budget averaged from peak to peak of the business cycle, the private domestic sector will be

• spending more than it is earning with a deficit on average a bit higher than the average current account (external) deficit over the cycle.
• spending more than it is earning with a deficit on average equal to the average current account (external) deficit over the cycle.
• spending more than it is earning with a deficit on average a bit lower than the average current account (external) deficit over the cycle.
• all you can really say is that it will be increasing its indebtedness.

Answer #1608

Answer: spending more than it is earning with a deficit on average equal to the average current account (external) deficit over the cycle.

Explanation

Please see Lhorreur economique for more information or post a comment.