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3. Effects of a government budget deficit Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates

3. Effects of a government budget deficit

Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget.

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