National Saving Equals Investment Plus Current Account Balance

Steps:

• Identify private saving (S) as $100 million and investment (I) as$150 million.
• Recall equilibrium condition: total saving = S + budget balance = I + current account balance.
• Set up equation: $100 + budget balance =$150 + current account balance.
• Solve for difference: budget balance = current account balance + $50 million.

Why D is correct:

• Budget surplus of $100 million and current account surplus of$50 million satisfy the equation ($100 =$50 + $50), balancing total saving with investment plus net exports per the national income identity.

Why the others are wrong:

• A: Deficits of $10 million (budget) and$50 million (current account) yield $-10 - (-$50) = $40, not$50.

Final answer: D