Compared to a Closed Economy, Expansionary Fiscal Policy in an Open

question 101

Multiple Choice

Compared to a closed economy, expansionary fiscal policy in an open economy has a smaller effect on aggregate demand because:

• A)it may increase interest rates and reduce domestic investment spending.
• B)the government may borrow abroad and decrease foreign capital inflows.
• C)it may increase interest rates and reduce net exports.
• D)it may increase government spending on imports.

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Definitions:

Market Value

The ongoing rate at which one can buy or sell an asset or service.

Weighted-Average

A method of calculating an average that takes into account the importance, or weight, of each value.

Stockholders' Equity

The residual interest in the assets of a corporation that remains after deducting its liabilities, representing ownership interest.

Book Value

The asset's recorded value on the balance sheet, determined by subtracting any depreciation or amortization from the asset's cost.