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If you can do this next one, you really understand some important and practical macro- economic causality. Using the theory w

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Well Govt budget deficit will result in greater demand for loanable funds. As a result rate of interest will rise in country. Hence foreign investors will invest more in this country to earn greater interest rate. As a result demand for country's currency rises. Hence the currency appreciates and thus exchange rate falls. (This means country's exports will become costly for foreigners and its imports will not be cheaper. Hence net exports fall)

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If you can do this next one, you really understand some important and practical macro- economic causality. Using the theory we have developed thus far, trace through the impact of a government, budge...
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