AP Macroeconomics Question 330: Answer and Explanation

Test Information

Use your browser's back button to return to your test results.

Question: 330

1. When government uses expansionary fiscal policy, the spending multiplier is often smaller than predicted because of

  • A. lower taxes.
  • B. increasing net exports.
  • C. falling unemployment.
  • D. lower interest rates.
  • E. rising price levels.

Correct Answer: E

Explanation:

E-The full multiplier is only felt if short-run aggregate supply is horizontal. Any increase in the price level decreases the impact of the spending multiplier.