Question content area

Part $1$

Crowding out effect from the use $of$ expansionary fiscal policy will $be$

Part $2$

$A.$

larger $in$ a closed economy because the higher interest rates will reduce domestic investment, consumption $of$ durables and increase net exports.

$B.$

insignificant because fiscal policy $is$ highly effective for both open and closed economies $in$ the short run.

$C.$

smaller $inan$ open economy because the lower interest rates will increase domestic investment, consumption $of$ durables but decrease net exports.

$D.$

larger $inan$ open economy because the higher interest rates will reduce domestic investment, consumption $of$ durables and net exports.