A country is dealing with two issues at once: deflation and a current account deficit in the balance of payments. It chooses to create a budget deficit and reduce interest rates. What effects are these policies likely to have on the two problems?
- Adeflation improves; current account deficit uncertain
- Bdeflation improves; current account deficit worsens
- Cdeflation worsens; current account deficit uncertain
- Ddeflation worsens; current account deficit worsens