In a model with flexible exchange rates and capital mobility, expansionary fiscal policy is likely to cause

Name: In a model with flexible exchange rates and capital mobility, expansionary fiscal policy is likely to cause
Brand: Quizplus
Rating: 4.8 (46 reviews)

Question

Quizplus · Accepted Answer

Expansionary fiscal policy typically increases domestic interest rates, attracting foreign capital and causing the domestic currency to appreciate. This appreciation makes exports more expensive and imports cheaper, leading to a reduction in net exports.

In a Model with Flexible Exchange Rates and Capital Mobility