Explain why government budget deficits crowd out private, Microeconomics

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Explain why government budget deficits crowd out private

Question: Explain why government budget deficits crowd out private investment spending in a closed economy, but crowd out net exports in a small open economy. Assume prices are flexible and that factors of production are fully employed in both economies. Use the basic version of the open-economy model where net exports is function of real exchange rate. Use diagrams to explain your answer.

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