AP Macroeconomics Question 18: Answer and Explanation
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1. Which of the following is equal to one?
- A. The elasticity of the long-run aggregate supply curve
- B. The spending (or expenditure) multiplier
- C. The money (or banking) multiplier
- D. The tax multiplier
- E. The balanced budget multiplier
Correct Answer: E
E The best approach to this question is to use Process of Elimination. The spending multiplier, money multiplier, and tax multiplier are all greater than 1, so eliminate (B), (C) and (D). Long-run aggregate supply is perfectly inelastic and thus not equal to 1, so eliminate (A). Therefore the answer is (E).