The net export crowding out effect refers to a situation in which
A)a fiscal expansion causes the local currency to appreciate,reducing the net exports.
B)a fiscal contraction causes the local currency to depreciate,reducing the net exports.
C)a monetary expansion causes the local currency to appreciate,reducing the net exports.
D)a monetary expansion causes the local currency to depreciate,increasing the net exports.

Question

Quizplus · Accepted Answer

The net export crowding out effect occurs as a result of a fiscal expansion causing an increase in the demand for domestic goods, which leads to an increase in the demand for the domestic currency. The resultant appreciation of the currency makes exports more expensive, thereby reducing net exports.

The Net Export Crowding Out Effect Refers to a Situation