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    Principles of Macroeconomics Study Set 11
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    Exam 20: Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates
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    Why Is It That a Sustained Increase in Government Spending
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Why Is It That a Sustained Increase in Government Spending

Question 102

Question 102

Essay

Why is it that a sustained increase in government spending (or investment) on income is smaller in an open economy than in a closed economy?

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The reason is that when government spend...

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