Fiscal policy boosts economy by increasing competition and profits.
The article explores how fiscal policy affects a small open economy with different sectors. By studying how taxes and government spending impact the economy, the researchers found that the fiscal multiplier, which measures the effect of these policies, is between zero and one. They also discovered that the multiplier increases as competition in the market decreases. Additionally, they compared the effects of fiscal policy under different conditions and developed a simple visual representation of their model.