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Explain with 2 graphs (closed economy and small open economy) why government budget deficits crowd out private investment spending in a closed economy but crowd
Explain with 2 graphs (closed economy and small open economy) why government budget deficits crowd out private investment spending in a closed economy but crowd out net exports in a small open economy. Assume that prices are flexible and that factors of production are fully employed in both economies. Assume that there is perfect capital mobility for the small open economy. Make sure to label the Investment levels on both graphs and explain the difference.
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