According to the open-economy macroeconomic model, a decrease in the U.S. government budget deficit increases U.S. net capital outflow, causes the real exchange rate of the dollar to depreciate, and increases U.S. net exports.

Question

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A decrease in the U.S. government budget deficit can lead to lower interest rates, encouraging capital outflow. This increases the supply of dollars in the foreign exchange market, causing the dollar to depreciate, which makes U.S. goods cheaper abroad and increases net exports.

According to the Open-Economy Macroeconomic Model, a Decrease in the U.S