In the context of international macroeconomics, the 'Twin Deficits' hypothesis links:
A. Only domestic saving and investment
B. The fiscal deficit and the current-account deficit
C. Only the trade deficit and the capital-account surplus
D. Only the revenue deficit and the primary deficit
Answer: Option B
Solution (By JKSSB Mock Tests)
The twin-deficits hypothesis posits a positive relationship between the government budget deficit and the current-account deficit, arising from the national accounting identity linking private saving, investment and the twin deficits.
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