In a simple open economy framework, an increase in government spending leads to: (A) A rise in budget deficit and a fall in current account deficit (B) A fall in both budget and current account deficits (C) A fall in budget deficit and a rise in current account deficit (D) A rise in both budget and current account deficits

DSE 2019 Question 19: Open-economy macroeconomics

In a simple open economy framework, an increase in government spending leads to:

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Open-economy macroeconomics has come up 55 times in 7 exams since 2006.

This question is on Internal and external balance, twin deficits, part of Open-economy macroeconomics in International Economics.

Reaching full employment and external balance together, and the link between budget and trade deficits.

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