Consider an open-economy AD/AS macro model.An expansionary fiscal policy will generally increase the government's budget ________ and also tends to ________ and thus ________ net exports.

Question

Quizplus · Accepted Answer

Expansionary fiscal policy typically increases government spending or decreases taxes, leading to a higher budget deficit. It can also cause the domestic currency to appreciate due to higher interest rates attracting foreign capital, which tends to decrease net exports as domestic goods become more expensive for foreigners.

Consider an Open-Economy AD/AS Macro Model