The net export effect may partially counteract an expansionary fiscal policy.

Question

Quizplus · Accepted Answer

The net export effect refers to the impact on net exports (exports minus imports) when there is a change in national income. An expansionary fiscal policy, such as increased government spending or lower taxes, can boost national income and therefore increase imports. This can lead to a decrease in net exports, partially counteracting the expansionary effect of the fiscal policy.

The Net Export Effect May Partially Counteract an Expansionary Fiscal