Suppose that in Country A, a small open economy, there is a positive shock to the propensity of consumers to save: for the same world real interest rate, all of a sudden people are willing to save more.
If the world real interest rate is unchanged ...
the Current Account Balance of Country A will improve
the Current Account Balance of Country A will deteriorate
the Current Account Balance of Country A will deteriorate if it's running a surplus, improve if it's running a deficit
the Current Account Balance of Country A will improve if it's running a surplus, deteriorate if it's running a deficit
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