AP Macroeconomics Question 238: Answer and Explanation

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Question: 238

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

Explanation:

(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.