Use the model of exchange rate determination to illustrate and explain as fully as you...
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Accounting
Use the model of exchange rate determination to illustrate and explain as fully as you can the link between the Government budget deficit (T-G) and the trade deficit (NX). You should refer explicitly to the equilibrium condition for a small open economy in your answer. (Hint: start from a position of trade balance (NX=0) and budget balance (T-G=0), then make a change to an exogenous variable that would lead to a budget deficit (T)
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