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

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.