Expansionary fiscal policy leads to ____ exchange rates, _____ exports, and _____ imports.

Question

Quizplus · Accepted Answer

Expansionary fiscal policy involves increased government spending and/or tax cuts, which leads to increased demand for goods and services. This increased demand can lead to higher inflation and higher interest rates, which in turn can lead to a stronger currency. A stronger currency makes exports more expensive and less competitive, leading to a decrease in exports. At the same time, imports become cheaper, leading to an increase in imports. Therefore, expansionary fiscal policy leads to higher exchange rates, decreased exports, and increased imports.

Expansionary Fiscal Policy Leads to ____ Exchange Rates, _____ Exports

Expansionary Fiscal Policy Leads to Exchange Rates, _ Exports