In the open-economy macroeconomic model which of the following falls if there is an increase in the budget deficit?
A)the interest rate
B)net exports
C)the exchange rate
D)All of the above are correct.

Question

Quizplus · Accepted Answer

An increase in the budget deficit can lead to higher interest rates, which attracts foreign capital, causing the domestic currency to appreciate. This appreciation makes exports more expensive and imports cheaper, leading to a decrease in net exports.

In the Open-Economy Macroeconomic Model Which of the Following Falls