Small Country in Large Union

Fiscal policy in the small country. Take for instance an increase in Dutch government purchases. Then what will be the impact on Dutch income, on income in the other union countries, and on income in the rest of the world? To illuminate this, regard a numerical example. The parameter values of the large union (and, for that matter, of the rest of the world) are c = 0.72, k = 0.25, and b = j, cf. chapter 1 in part four. The parameter values of the small country are c = 0.72 and q = 0.24, cf. section 1 in part one. Now consider an increase in Dutch government purchases of 100. According to section 1 from part one, this causes an increase in Dutch income of 192. According to chapter 1 from part four, the policy action causes an increase in union income of 94, an increase in rest-of-the-world income of equally 94, and an increase in world income of 189. As a result, the policy action causes a decline in rest-of-the-union income of 98.