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.
d
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Suppose that the government allocates the abatement responsibility uniformly, requiring each polluter to abate 10 units of pollution. Quantitatively assess the cost implications.
Assume that there are two firms, each emitting 20 units of pollutants into the environment, for a total of 40 units in their region. The government sets an aggregate abatement standard (AST) of 20 units. The polluters' cost functions are as follows, where the dollar values are in thousands: Polluter 1: TAC1 = 10 + 0.75(A1)2, Polluter 2: TAC2 = 5 + 0.5(A2)2, MAC1 = 1.5A1, MAC2 = A2.
A level of GDP cannot be at equilibrium when aggregate demand exceeds output because firms will notice that
A. inventory stocks are building up. B. inventory stocks are being depleted. C. their profits are negative. D. many of their workers have little to do.
The demand curve for a firm’s product is also the curve showing
A. total revenue. B. marginal revenue. C. average revenue. D. average profits.
Structural unemployment occurs when unemployed workers move between jobs
a. True b. False Indicate whether the statement is true or false