Question

Expansionary monetary policy is more effective in an open economy because:.

Answer 1

In an open economy, expansionary fiscal policy  increases in government spending can raise interest rates, which raises the dollar's value and pushes out net exports  is the reason of effectiveness Expansionary monetary policy.

What is Expansionary monetary policy?

Expansionary policy, often known as loose policy, is a macroeconomic policy aimed at boosting economic growth.

Monetary or fiscal policy can both be used to expand the economy or a combination of the two.

It is part of Keynesian economics' overarching policy prescription for reducing the negative effects of economic cycles during slowdowns and recessions.

Thus, increases in government spending can raise interest rates is the reason of effectiveness Expansionary monetary policy.

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