Is-Lm model

The twin-deficit hypothesis claims that there is a link between fiscal deficit and trade deficit. The- story goes as follows. If the government-borrowing pushes-up the interest rate, the higher return. will attract foreign funds. This pulls the currencies held by foreigners away from pur- chasing exports towards investing in financial assets, so the budget deficit is accompanied by a trade deficit.. Do you agree or disagree with this hypothesis? How would your answer change if the economy were initially at a liquidity trap? Explain your answer in the context of the IS-LM model. (Hint: Consider a fiscal expansion. Assume that-consumption, investment, and net export are all functions that decrease with an increase in the interest rate.)-1