AP Macroeconomics Question 238: Answer and Explanation
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5. The appropriate fiscal policy to remedy a recession is to
- A. increase government spending and taxes.
- B. reduce government spending and taxes.
- C. increase government spending and reduce taxes.
- D. decrease government spending and increase taxes.
- E. increase the money supply.
Correct Answer: C
(C) Increasing government spending and reducing taxes stimulate aggregate demand and fight recessions. Increasing the money supply does this as well, but that is monetary policy.