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Given a small open economy where the world real interest rate is higher than the equilibrium domestic real interest rate, an increase in the budget
Given a small open economy where the world real interest rate is higher than the
equilibrium domestic real interest rate, an increase in the budget deficit would lead to
a) a decrease in net capital inflows.
b) an increase in net capital outflows.
c) no change to net capital flows.
d) a decrease in net capital outflows.
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