AP Macroeconomics Question 450: Answer and Explanation
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13. If the economy were experiencing a recessionary gap, choose the option below that would be an appropriate fiscal policy to eliminate the gap, and the predicted impact of the policy on real GDP and unemployment.
FISCAL POLICY REAL GDP UNEMPLOYMENT
- A. Increase taxes. Increase Decrease
- B. Decrease spending. Decrease Increase
- C. Decrease taxes. Increase Increase
- D. Increase money supply. Increase Decrease
- E. Decrease taxes. Increase Decrease
Correct Answer: E
E-Know how fiscal policy affects real GDP and unemployment.