Expansionary monetary policy is more effective in an open economy because: a. open market operations can be used to buy and sell foreign as well as domestic bonds. b. interest rate decreases also reduce the government budget deficit, which reduces the current account deficit and increases demand. c. interest rate decreases also reduce the value of the dollar, which increases net exports and further increases aggregate demand. d. decreases in interest rates have an impact on foreign direct investment, encouraging the construction of factories and the purchase of stocks.

Brian has just finished college. he wants to set up a small business to make and sell fireworks. he registers his company and acquires a license from the government. he finds that most of his competitors are selling fireworks at an extremely low price. he would like to make more money, so he decides to innovate and develop better fireworks. he sells his fireworks at a higher price, and they are a huge hit with the customers. after a few years, he earns enough profit to set up a bigger fireworks factory that complies with the government’s health and safety regulations. he even starts exporting fireworks overseas. which type of economy does this scenario describe?