An increase in U.S.federal government budget deficits that raises U.S.interest rates relative to the rest of the world should

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An increase in U.S. federal government budget deficits that raises U.S. interest rates relative to the rest of the world would attract foreign capital, appreciating the dollar. This makes U.S. goods more expensive abroad and foreign goods cheaper in the U.S., thus increasing imports and decreasing exports. Consequently, this would increase the current account deficit.

An Increase in U