In an open economy like Canada's,a fiscal expansion by the government tends to

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In an open economy, a fiscal expansion often leads to higher interest rates as the government borrows more. This attracts foreign capital, appreciating the currency. A stronger currency makes exports more expensive and imports cheaper, which tends to reduce net exports. This process does not necessarily encourage private investment directly; rather, the increased demand for the domestic currency and the subsequent appreciation can crowd out net exports by making them less competitive internationally.

In an Open Economy Like Canada's,a Fiscal Expansion by the Government