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The twin deficits refer to the simultaneous occurrence of a budget deficit and a current account deficit in a country's economy. The link between them lies in the fact that a budget deficit, which occurs when government spending exceeds revenue, may lead to increased borrowing. This borrowing can fuel domestic demand, potentially resulting in higher imports and thus widening the current account deficit. Essentially, higher government spending can stimulate consumption and investment, leading to an imbalance in trade if domestic production does not keep pace.

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2mo ago

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