If net exports become less sensitive to changes in exchange rates, the crowding-out effect of government spending will increase.

Question

Quizplus · Accepted Answer

If net exports become less sensitive to changes in exchange rates, it means that the demand for exports and imports is less responsive to changes in currency value. This makes it more difficult for government spending to stimulate a shift in the economy towards net exports, which may lead to a crowding-out effect where government spending reduces private investment and economic growth.

If Net Exports Become Less Sensitive to Changes in Exchange