(Chapter 10, again)Imagine that the economy of Japan finds itself in the following situation: the government budget has a surplus of 1% of Japan’s GDP; private saving = 20%

1. (Chapter 10, again)Imagine that the economy of Japan finds itself in the following situation: the government budget has a surplus of 1% of Japan’s GDP; private saving = 20% of GDP; and physical investment is 18% of GDP.Based on the national saving and investment identity, what is the current account balance (as a percentage of GDP)? (You do not have to look up anything! Simply use these percentages (in place of numbers) in the identities.)Remember: (M-X) + S = (G-T) + Ii.e.,Foreign Saving + Domestic Saving = Government’s Budget Deficit + Private Investment BorrowingorSupply of Financial Capital = Demand for Financial Capital(b)If the government budget turns into a deficit of 1% of GDP, how will this affect the current account balance? (Assume private saving remains at 20% of GDP and investment remains at 18% of GDP.)