What is an open economy?
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Explain what is an open economy and give an example of a country with an open economy
An article in the Economist quotes the finance minister of Peru as saying, "We are one of the most open economies of Latin America." Source: "Hold on Tight," Economist, February 2, 2013. Is the fiscal policy in Peru likely to be more or less effective than it would be in a less open economy? Briefly explain.
A. Contractionary fiscal policy will be more effective in an open economy than in a less open economy.
B. Fiscal policy will have a larger impact on aggregate demand in an open economy than in a less open economy.
C. Expansionary fiscal policy will be more effective in an open economy than in a less open economy.
D. Fiscal policy will have a smaller impact on aggregate demand in an open economy than in a less open economy.
What is the effect of government budget deficit in an open economy?
