How do budget deficits lead to trade deficits?
A) Budget deficits lead to higher interest rates, which lead to net capital inflows, which lead to currency appreciation, thus reducing net exports.
B) Budget deficits lead to lower interest rates, which lead to net capital inflows, which lead to currency appreciation, thus reducing net exports.
C) Budget deficits lead to higher interest rates, which lead to net capital outflows, which lead to currency appreciation, thus reducing net exports.
D) Budget deficits lead to higher interest rates, which lead to net capital inflows, which lead to currency depreciation, thus reducing net exports.
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