Finance Problem Set 6 2-3
1. Suppose the hypothetical country of Avalon has a current account deficit
of $20 billion this year. From the two scenarios listed in each part below,
identify which scenario would make this deficit more worrisome to an economic
analyst and which scenario would be less worrisome. Briefly explain why.
A. Scenario 1: Avalon's GDP is $80 billion dollars per year.
B. Scenario 1: Avalon is a net debtor country.
C. Scenario 1: Avalon's annual consumption spending is 50% of GDP
D. Scenario 1: Avalon's GDP grew 1% last year
©1999-2006 Steven M. Suranovic, ALL RIGHTS RESERVED
Last Updated on 2/4/04