Under less-than-full-employment conditions, an increase in the desired level of domestic consumption will
1. increase the equilibrium level of output and employment and reduce the equilibrium current account balance.
2. increase the equilibrium levels of output employment and the current account balance.
3. reduce the equilibrium levels of output and employment and the current account balance.
4. affect the current account balance in a direction that can only be determined from additional information about the shocks to imports and savings.
Choose the correct option.