Question

Oceania is a small open economy. suppose that a large number of foreign countries begin to subsidize investment by instituting an investment tax credit (while adjusting other taxes to hold their tax revenue constant), but oceania does not institute such an investment subsidy.

Answer 1

Oceania will have to take some other decisions like cutting taxes, subsidizing machinery, etc. since there's no investment tax credit

Step-by-step explanation:

Instruments like Investment Tax Credit is a tax used to help to finance the expansion of a sector. Like Solar energy ITC in America.

Since Oceania is a small country, with an open economy, and all other foreign countries do and Oceania does not, then it will be at a disadvantage.

Moreover, this small economy will have to take some other decisions on its economy like cutting taxes for some economy sectors which is desirable, subsidizing machinery, and so on.