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Q5. Assume that the Marshall-Lerner condition holds. Show that a trade surplus corresponds to excess of saving (private plus public) over investment and answer the
Q5. Assume that the Marshall-Lerner condition holds. Show that a trade surplus corresponds to excess of saving (private plus public) over investment and answer the following briefly: a. What happens to output, saving and investment if there is a real depreciation? b. Can the government budget deficit decline and the trade deficit simultaneously increase? 2
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