ABSTRACT
In this work we have been applying the method of diminishing abstraction. This is true not only as between the three main parts of the book, but also within this final part itself, where in studying the possibilities of offsetting various types of disturbances we have up to now assumed a closed economy, i.e. we have ignored foreign trade. It may seem quite meaningless to discuss the problems of fiscal policy for a country such as Sweden in such a restricted way. Obviously in a small country which to a very large extent has its economy based on foreign trade, the price level and employment will be greatly dependent on foreign trade conditions, and all measures to secure a stable value of money at full employment must have some effect on foreign trade. Can a discussion, which ignores all this, be of any value at all? This is a fair question. Naturally a discussion on economic policy which disregards foreign trade is, to say the least, incomplete; on the other hand, this does not mean that the findings are necessarily wrong, however, for some of the main ideas may be perfectly valid, and all that is necessary is some modification of them. This cannot be decided a priori; in order to arrive at an answer to these questions we therefore proceed to examine the policy problem in an open economy, where foreign trade is vital for the functioning of economic life.
