AP MACRO Policies and Theories 1

Question 1

Which of the following is a tool of fiscal policy?

Accepted Answer

Government spending

Answer

Open market operations

Answer

Changes in the reserve requirement

Answer

Adjustments to the discount rate

Question 2

What happens to the aggregate demand curve when the government increases taxes?

Accepted Answer

It shifts to the left.

Answer

It shifts to the right.

Answer

It remains unchanged.

Answer

It becomes steeper.

Question 3

Which of the following is most associated with expansionary monetary policy?

Accepted Answer

Buying government securities

Answer

Raising interest rates

Answer

Reducing the money supply

Answer

Increasing taxes

Question 4

Keynesian economists believe that during a recession, the government should:

Accepted Answer

Increase government spending and cut taxes.

Answer

Reduce government spending to balance the budget.

Answer

Increase taxes to fund social programs.

Answer

Allow the economy to self-correct without intervention.

Question 5

What is the primary goal of contractionary fiscal policy?

Accepted Answer

To reduce inflation

Answer

To stimulate economic growth

Answer

To lower unemployment

Answer

To increase the money supply