Question 5 According to the Keynesian model of income determination, fiscal policy is more powerful in a closed economy than in an open economy, for a given tax rate and a give MPC because. ( In an open economy the increase in government expenditure results in an Increase in imports, which represent a injection of the circular flow There are more leakages in a closed economy than in an open economy. ) Keynes didn't believe in the benefits of free trade. O In an open economy the increase in government expenditure results in an increase In Imports, which represent a leakage of the circular flow Question 6