We will generally observe that the more open an economy:

Question

Quizplus · Accepted Answer

When an economy is more open, it is more susceptible to external shocks and changes in the global market. Fiscal policy may have a smaller impact on output because changes in government spending or taxes may be offset by changes in the trade position or capital flows. Additionally, a more open economy is likely to have a higher degree of trade interdependence, and changes in fiscal policy can cause greater impacts on the trade position. Therefore, the smaller the effect of fiscal policy on output and the larger the effect of fiscal policy on the trade position is the best choice.

We Will Generally Observe That the More Open an Economy