In an open economy,expansionary fiscal policy that creates deficit spending by Canadian government borrowing is likely to lead to

Question

Quizplus · Accepted Answer

Expansionary fiscal policy resulting in deficit spending by the Canadian government will increase domestic demand, leading to an increase in imports. This, in turn, puts upward pressure on the Canadian dollar's exchange rate, making exports more expensive and less competitive in foreign markets, leading to a reduction in exports.

In an Open Economy,expansionary Fiscal Policy That Creates Deficit Spending