According to the open-economy macroeconomic model,an increase in the U.S.government budget surplus 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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An increase in the U.S. government budget surplus can lead to lower interest rates, which encourages capital outflow. This increases the supply of dollars in the foreign exchange market, causing the real exchange rate to depreciate and making U.S. goods cheaper abroad, thus increasing net exports.

According to the Open-Economy Macroeconomic Model,an Increase in the U