Using relevant Classical Theories, explain how this would affect her net capital outflow, real exchange rate and trade deficit in the long run.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Suppose Country A is a small open economy with a trade deficit. With a rising
concern of plausible supply chain issues, business firms in Country A tend to
increase their level of inventory.

Using relevant Classical Theories, explain how this would affect her net
capital outflow, real exchange rate and trade deficit in the long run. 

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