This paper uses an intertemporal disequilibrium model of a monetary (i.e. cash-in-advance) economy to explain the effects of fiscal policy on the current account in the presence of flexible exchange rates and short-run real wage rigidity that gives rise to classical unemployment. The differing effects of alternative methods of financing government expenditures--by raising taxes, borrowing via the issue of governments securities, or printing money--are considered within a microtheoretic optimizing framework. Our results are strikingly different from those of standard sticky wage-price rational expectations models as well as those of the new intertemporal Walrasian-equilibrium models. For example, we show that reducing government spending will, in the presence of classical unemployment, worsen the current account. This worsening is larger the more 'permanent' the policy shift is perceived to be. These results are contrary to the usual presumption based on the above-mentioned alternative models.