AP Macro Unit 4 Lesson 4 - Spring 2011

5 Questions | Total Attempts: 84

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AP Macro Unit 4 Lesson 4 - Spring 2011

Welcome to “AP Macro Unit 4 Lesson 4 – Spring 2011” where we’ll be taking a look at a whole host of questions regarding the Fiscal policy – the means by which governments can adjust their spending levels and tax rates to influence a country’s economy – as well as the Aggregate Demand-Aggregate Supply Model.


Questions and Answers
  • 1. 
    Which of the following contributes to the time lags in implementing fiscal policy?I. The legislative processII. The need to collect and analyze current economic dataIII. The administration of new policy
    • A. 

      I only

    • B. 

      II only

    • C. 

      III only

    • D. 

      I and III only

    • E. 

      I, II and III

  • 2. 
    Which of the following is an example of an automatic fiscal policy?
    • A. 

      An interest rate cut initiated by the central bank

    • B. 

      An increase in payments to the unemployed initiated by the state of the economy

    • C. 

      An increase in the quantity of money initiatied by the central bank

    • D. 

      A tax cut initiated by an act of Congress

    • E. 

      All of the above

  • 3. 
    Which of the following is an example of an expansionary fiscal policy?
    • A. 

      Increasing taxes on households and firms

    • B. 

      Increasing government spending on goods and services

    • C. 

      Decreasing government transfer payments

    • D. 

      Decreasing interest rates

    • E. 

      Increasing the money supply

  • 4. 
    Which of the following is an appropriate fiscal policy to combat inflation?
    • A. 

      Decreasing taxes

    • B. 

      Decreasing government spending on goods and services

    • C. 

      Increasing government transfer payments

    • D. 

      Increasing interest rates

    • E. 

      Decreasing the money supply

  • 5. 
    If the economy is in short-run equilibrium above and beyond its long-run equilibrium, a(n) ___________ exists and discretionary fiscal policy that ____________ will return real GDP to its potential (long-run, sustainable) level
    • A. 

      Inflationary gap; increases aggregate demand

    • B. 

      Inflationary gap; decreases aggregate demand

    • C. 

      Recessionary gap; increases aggregate demand

    • D. 

      Recessionary gap; decreases aggregate demand

    • E. 

      Recessionary gap; decreases aggregate demand

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