AP Macroeconomics Question 359: Answer and Explanation

Test Information

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Question: 359

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

Explanation:

D-Expansionary fiscal policy can be weakened if government borrowing drives up interest rates and diminishes private investment.