I am confused about the relationship between fiscal policy and net exports.
Suppose government goes for expansionary fiscal policy
Case 1 - If public expenditure rises, income rise, rise in imports and we see negative net exports and therefore, negative trade balance. Case 2 - If public expenditure increases, demand of dollar rise and supply of rupee increases which will cause depreciation of rupee and depreciation makes imports costly and exports cheaper so export will rise so positive net exports and therefore, positive trade balance.
Are both equally feasible? if not then which case hold true and why and why the other case is not true? Or Is it the net effect we consider?
Thank you so much for your help.