AP Macroeconomics Question 359: Answer and Explanation
Use your browser's back button to return to your test results.
6. Which of the following lessens the impact of expansionary fiscal policy?
- A. An increase in the marginal propensity to consume.
- B. Lower interest rates that cause a decrease in net exports.
- C. Higher interest rates that cause an increase in net exports.
- D. Higher interest rates that decrease private investment.
- E. Falling price levels.
Correct Answer: D
D-Expansionary fiscal policy can be weakened if government borrowing drives up interest rates and diminishes private investment.