Starting from a position of NX as zero, expansionary fiscal policy is likely to cause negative NX.

Question

Quizplus · Accepted Answer

Expansionary fiscal policy, which involves increased government spending or decreased taxes, can lead to higher domestic interest rates. Higher interest rates attract foreign capital, appreciating the domestic currency, making exports more expensive and imports cheaper, thus likely leading to a decrease in net exports (NX).

Starting from a Position of NX as Zero, Expansionary Fiscal