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Answer is Option C?
yes using the equation s-i=(x-m)+(g-t)
As Private savings increases i.e S in the equation keeping others constant X-M (Current Account surplus) or Capital Account deficit i.e outflow of Capital Rises.
Hope this helps !
As there is a sharp decline in the real estate values, the household sector has increased its savings because they feel they can need the money in the future because of a dull economy ahead. Now, the question says Output and Investment activity remain unchanged, which means there is no change in the Govt. Deficit- So, option A is out.
Since, there is excess savings with the household sector now as they are saving more. Where would the excess savings go? Obviously, it will go to abroad because the economy in the Domestic market say India is not looking attractive, as there is a sharp decline in real estate prices, so the excess savings is sent abroad. Which means there will be a current account surplus i.e Exports>Imports and Capital Account Deficit i.e Capital Outflows. Hence, option C is the answer.