An expansionary fiscal policy can be partially offset by a(n):

a. increase in aggregate demand
b. increase in aggregat supply
c. depreciation of the dollar
d. decrease in net exports

Hdi

An expansionary fiscal policy is aimed at stimulating economic growth by increasing government spending, decreasing taxes, or a combination of both. This policy typically leads to an increase in aggregate demand (AD) in the economy. However, this increase in AD can be partially offset by various factors.

Among the options provided, a decrease in net exports (option d) can partially offset the effects of an expansionary fiscal policy. When net exports decrease, it means that the value of exports is lower than the value of imports, resulting in a decrease in aggregate demand. This decrease in aggregate demand can partially offset the expansionary effects of fiscal policy.

To summarize, the correct answer is d. decrease in net exports.

To answer this question, we need to understand what an expansionary fiscal policy is and how it affects the economy.

Expansionary fiscal policy refers to the government's use of increased spending and/or reduced taxes to stimulate economic growth. The goal is to increase aggregate demand, which is the total amount of goods and services demanded in the economy.

Now, let's analyze the options:

a. Increase in aggregate demand: An expansionary fiscal policy is designed to increase aggregate demand, so it does not partially offset the policy. Instead, it aligns with the policy's objective.

b. Increase in aggregate supply: An increase in aggregate supply refers to an expansion in the economy's production capacity. While this can be helpful for economic growth in the long term, it does not offset an expansionary fiscal policy. The policy aims to boost demand rather than supply.

c. Depreciation of the dollar: A depreciation of the dollar, meaning the value of the currency decreases relative to other currencies, can partially offset an expansionary fiscal policy. When the dollar weakens, it becomes cheaper for foreigners to buy goods and services from the country implementing the policy. This leads to an increase in net exports, which helps to partially offset the expansionary fiscal policy.

d. Decrease in net exports: A decrease in net exports, meaning the value of exports is lower than the value of imports, can also partially offset an expansionary fiscal policy. If net exports decline, it implies that there is reduced demand for the country's goods and services from abroad. This counters the expansionary fiscal policy to some extent.

Considering the options, the correct answer would be:

c. Depreciation of the dollar

However, it's worth noting that the effects of an expansionary fiscal policy can be complex and depend on various factors, including the country's economic conditions and external factors like global economic trends.

c