Why Is Fiscal Policy Less Effective in an Open Economy

question 33

Multiple Choice

Why is fiscal policy less effective in an open economy than in a closed economy?

• A)Expansionary fiscal policy raises demand for imports, which reduces aggregate demand.
• B)Expansionary fiscal policy raises interest rates, which raises the value of the currency, and reduces aggregate demand.
• C)Expansionary fiscal policy raises the value of the currency, which reduces demand for exports.
• D)Expansionary fiscal policy has all the above effects.

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Definitions:

Postneonatal Paralysis

Paralysis affecting infants after the neonatal period, which is the first four weeks of life, potentially resulting from various causes, including infections, trauma, or congenital conditions.

Elderly

Referring to older adults or aging individuals, often considered to be those aged 65 and above, who may face unique health and social challenges.

Anglo Americans

Individuals of English descent in the United States, or more broadly, English-speaking Americans of European ancestry.

Native Americans

Refers to the indigenous peoples of the United States, including their cultures, histories, and present-day communities.