According to David Hume’s theory of automatic price adjustment, countries experiencing current account deficit see price levels decrease, making them more competitive and increasing exports. That makes the current account deficit disappear.’.

The United States has a current account deficit equal to about 3.5 percent of GDP. Suppose that the US Government decides that it wants to reduce that to about 2.0 percent of GDP. A current account deficit means that the US is a For the US current account balance to Consequently one of these things must happen: US investment private savings net lender to exports and imports government expenditure US domestic savings must rise; and/or must fall. be balanced rise net taxes government savings net foreign income the rest of the world. (as they wish it to) then rest of the world savings must net borrower from net exporter of goods and services to MacBook Air be less than US savings fall net importer of goods and services from

Write a short essay (max 150 words) analyzing the following. The US has been maintaining a current account deficit for a long time. It widened by 167.0billion, or 34.8percent, to647.2 billion in 2020. Using the two-period model of the current account, explain why Covid-19 can cause this widening.

provide full solution and explaination