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    Trade deficit and interest rates

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    Evaluate whether the following statements are True or False, and explain your answer:
    a. A trade deficit occurs when the government spends more than it receives in tax revenue
    b. An increase in interest rates in the rest of the world will lead to a stronger dollar

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    Solution Preview

    a. False. A trade deficit occurs when imports are higher than exports. That is, a negative balance of trade. A government budget deficit is when the government ...

    Solution Summary

    This solution goes over international economic concepts including trade deficit and interest rates.