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Unformatted text preview: worsens fiscal policy Expansionary fiscal policy worsens the balance of payments in the long run. A rise in government spending, for example, causes 1. Y to rise so imports go up, worsening the BOP 2. r to rise, leading to an inflow of money which improves the BOP, but only in the short run Fiscal policy is more effective than monetary policy when exchange rates are fixed....
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