What will happen to the trade balance and the real exchange rate of small open economy when government purchase increase such as during a war.?

When government purchases increase, particularly during a war, the trade balance of a small open economy typically deteriorates. This is because higher government spending can boost domestic demand, leading to increased imports. As demand for foreign goods rises, the trade balance moves towards a deficit, which can exert downward pressure on the real exchange rate. Consequently, the real exchange rate may depreciate, making exports cheaper and imports more expensive, potentially stimulating future export growth.