In an open economy with fixed exchange rates, a contractionary fiscal policy:
A) is very effective in changing equilibrium output.
B) is not effective in changing equilibrium output.
C) is effective in changing the exchange rate.
D) is not effective in changing capital flows between countries.
E) does not change capital flows or the exchange rate.

Question

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The Answer of In an open economy with fixed exchange rates, a contractionary fiscal policy:
A) is very effective in changing equilibrium output.
B) is not effective in changing equilibrium output.
C) is effective in changing the exchange rate.
D) is not effective in changing capital flows between countries.
E) does not change capital flows or the exchange rate.

In an Open Economy with Fixed Exchange Rates, a Contractionary