AP Macroeconomics Practice Exam 2 ❮ 205- If the economy were experiencing a recessionary
gap, choose the option below that would be an
appropriate fiscal policy to eliminate the gap,
and the predicted impact of the policy on real
GDP and unemployment.
REAL
FISCAL POLICY GDP UNEMPLOYMENT
(A) Increase taxes. Increase Decrease
(B) Decrease Decrease Increase
spending.
(C) Decrease taxes. Increase Increase
(D) Increase Increase Decrease
money supply.
(E) Decrease taxes. Increase Decrease
- Monetary tools of the Federal Reserve do not
include which of the following choices?
(A) Buying Treasury securities from commer-
cial banks
(B) Changing tariffs and quotas on imported
goods
(C) Changing the reserve ratio
(D) Changing the discount rate
(E) Selling Treasury securities to commercial
banks - Of the following choices, which combination
of fiscal and monetary policy would most likely
reduce a recessionary gap?
FISCAL POLICY MONETARY POLICY
(A) Increase taxes. Increase the reserve ratio.
(B) Decrease spending. Sell Treasury securities.
(C) Decrease taxes. Buy Treasury securities.
(D) Increase spending. Increase the reserve ratio.
(E) Decrease taxes. Increase the discount rate.
- For a given level of government spending,
the federal government usually experiences a
budgetduring economicand a budget
__during economic___.
(A) deficit, recession, surplus, expansion
(B) surplus, recession, deficit, expansion
(C) deficit, expansion, surplus, recession
(D) surplus, recession, surplus, expansion
(E) deficit, recession, deficit, expansion
47. Suppose that elected officials and the central
bank agree to combine fiscal and monetary poli-
cies to lessen the threat of inflation. Which of
the following combinations would likely accom-
plish this goal?
FISCAL POLICY MONETARY POLICY
(A) Decrease taxes Increase the reserve ratio
(B) Decrease spending Buy government securities
(C) Decrease taxes Sell government securities
(D) Decrease spending Decrease the reserve ratio
(E) Increase taxes Increase the discount rate- Congress has embarked on another round of
expansionary fiscal policy to boost employment
and get reelected. As chair of the central bank,
how would you reduce the “crowding-out”
effect and what macroeconomic problem might
your policy exacerbate?
(A) Increase the reserve ratio, risking the devalu-
ation of the dollar
(B) Sell government securities, risking inflation
(C) Buy government securities, risking a reces-
sionary gap
(D) Lower the discount rate, risking inflation
(E) Lower the discount rate, risking cyclical
unemployment - Which of the following is likely to shift the
long-run aggregate supply curve to the right?
(A) A nation that devotes more resources to
nondurable consumption goods, rather
than durable capital goods
(B) Research that improves the productivity of
labor and capital
(C) More restrictive trade policies
(D) Annual limits to immigration of foreign
citizens
(E) A permanent increase in the price of energy - Holding all else equal, which of the following
monetary policies would be used to boost U.S.
exports?
(A) Increasing the discount rate
(B) Increasing the reserve ratio
(C) Buying government securities
(D) Lowering tariffs
(E) Removing import quotas