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.
- 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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