Why Is the Multiplier for Contractionary Fiscal Policy Smaller in an Open

question 99

Multiple Choice

Why is the multiplier for contractionary fiscal policy smaller in an open economy?

• A)Contractionary fiscal policy reduces the deficit,which raises the interest rate,which raises the foreign exchange value of the dollar,which increases net exports.
• B)Contractionary fiscal policy increases the deficit,which raises the interest rate,which reduces the foreign exchange value of the dollar,which increases net exports.
• C)Contractionary fiscal policy reduces the deficit,which reduces the interest rate,which reduces the foreign exchange value of the dollar,which increases net exports.
• D)Contractionary fiscal policy reduces the deficit,which reduces the interest rate,which reduces the foreign exchange value of the dollar,which decreases net exports.

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Definitions:

Power Distance

This term refers to the degree to which individuals in a society accept and expect power to be distributed unequally.

National Culture

The shared values, norms, behaviors, and artifacts of a nation's inhabitants that distinguish it from other nations.

Geert Hofstede

A Dutch social psychologist known for his research on cross-cultural groups and organizations, notably for pioneering the study of cultural dimensions affecting work behavior.

International Human Resource Management

the management of human resources in an international context, including understanding and managing diverse workforces across different cultures.