What is the relationships between current account deficit (CAD), budget deficit

Question

What is the relationships between current account deficit (CAD), budget deficit and national debt, knowing that the US national debt is currently at $21.13 trillion? Note the following GDP equation and identities: I = Sp + (T - G) + (Im - Ex). I=Investment; Sp=private savings; T-G = public savings, tax revenue minus government spending, which could be budget deficit if G>T; Im-Ex = imports minus exports, which could lead to current account deficit if Im>Ex leading to NCI (net capital inflow).

Explanation / Answer

Budget Deficit = G -T

Current Account Deficit = Imports - Exports

National Debt = Borrowing by Government to finance its expenditure. So, it is the same as the fiscal deficit.

Increase in government spending leads to an increase in the fiscal deficit as well as national debt. This leads to a rise in aggregate demand, inflation and currency depreciation. So, exports increases but imports become costly and Current account deficit also increases.

It means these three are directly related.

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