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AP Macroeconomics Pol 1 F Explain Using Graphs As Appropriate the Effects of Combined Fiscal and Monetary Policy Actions Questions

Combine fiscal and monetary actions to close output gaps, control inflation, and manage their joint effects on interest rates and private investment.

Syllabus
Effective Fall 2022
Course
AP Macroeconomics

Exam points

  • pair expansionary fiscal and monetary actions to close a severe recessionary gap
  • pair contractionary fiscal and monetary actions to reduce demand-pull inflation
  • select limited- or ample-reserve monetary tools when constructing a coordinated policy mix
  • trace a reinforcing policy mix through aggregate demand, output, employment, and the price level
  • analyse opposing fiscal and monetary actions for definite or indeterminate rate and output effects

AP Macroeconomics Pol 1 F Explain Using Graphs As Appropriate the Effects of Combined Fiscal and Monetary Policy Actions Questions 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.

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