How do budget deficits lead to trade deficits? A) Budget deficits lead to higher

Question

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

Explanation / Answer

A) Budget deficits lead to higher interest rates, which lead to net capital inflow, which leads to currency appreciation, thus reducing net exports

the above is the answer

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