1 A. Canada's Gross Domestic Product is $200. Consumers spend $120 on consumer goods ($100 are domestically made consumer goods, $20 are imports), pay $35 in taxes, and save $45. Firms borrow $40 to make $40 in domestic investment spending. The government collects $35 in taxes and makes $38 in government spending. Also, the country has exports but I'm not telling you how much. What is Canada's current account?
B. Suppose now that Canada's consumers change the types of goods they buy. They spend more on imported goods and less on Canadian-made goods, but their overall consumption spending remains constant, as does their savings and taxes. If investment spending, government spending, and the overall GDP are also constant, what happens to Canada's Current Account (rise,fall,stay constant?) Explain why.
C. In part B, what happens to the amount of exports from Canada?