CourseCourseConceptConceptDocsDocuments

AP Macroeconomics 5.1 Fiscal and Monetary Policy Actions in the Short Run Questions

Practise coordinating fiscal and monetary policy to close recessionary or inflationary gaps and trace effects on demand, output, prices, rates, and employment.

Syllabus
Effective Fall 2022
Course
AP Macroeconomics

Exam points

  • select reinforcing fiscal and monetary actions for recessionary or inflationary gaps
  • use the correct limited- or ample-reserve monetary tool within a policy combination
  • trace a reinforcing mix through aggregate demand, output, employment, and prices
  • analyse opposing policy directions for definite or indeterminate macroeconomic effects
  • design a mix that offsets the interest-rate effect and limits changes in private investment

Covered syllabus points

POL-1.F—Explain (using graphs as appropriate) the effects of combined fiscal and monetary policy actions

Question 1

[Maximum number: 1]

The country of Arden has a banking system with limited reserves. Arden's economy falls into a recession, and its government and central bank each implement policies to restore full employment. Which of the following combinations of fiscal and monetary policy would be most effective to achieve this objective?

A

Arden's government increases taxes on businesses, and its central bank decreases the required reserve ratio.

B

Arden's government increases spending, and its central bank sells bonds on the open market.

C

Arden's government increases the minimum wage, and its central bank increases the required reserve ratio.

D

Arden's government decreases unemployment benefits, and its central bank buys bonds on the open market.

E

Arden's government decreases personal income tax rates, and its central bank buys bonds on the open market.

All question bank results loaded