If the government adopts a fiscal policy that is:
A)expansionary, then net exports are likely to expand and reinforce the effects of the fiscal policy.
B)contractionary, then net exports are likely to decline and partially offset the effects of the fiscal policy.
C)contractionary, then net exports are likely to rise and reinforce the effects of the fiscal policy.
D)expansionary, then net exports are likely to decline and partially offset the effects of the fiscal policy.

Question

Quizplus · Accepted Answer

Expansionary fiscal policy can lead to higher domestic interest rates, attracting foreign capital, appreciating the domestic currency, and making exports more expensive, thus reducing net exports.

If the Government Adopts a Fiscal Policy That Is