AP MACROECONOMICS CHAPTER 31
QUESTIONS WITH CORRECT ANSWERS
2026-2027
Define Fiscal Policy - correct answer-The government's plan for spending and taxation
If a country is in recession/unemployment: what are the fiscal solutions - correct answer-
Expansionary policy:
Increase government spending and decrease taxes
If a country is experience inflation: what fiscal solution should it use? - correct answer-
Contractionary policy: decrease government spending and increase taxes
What kind of effect (direct or indirect) does government spending have? - correct answer-
a direct effect
What kind of effect (direct or indirect) does taxes spending have? - correct answer-indirect effect
Do tax changes have a greater or lesser effect than government spending - correct answer-lesser
What are the glitches in Fiscal policy - correct answer-1. it takes time
2. economic needs change quickly
3. Bureaucracy
4. The crowding in effect
5. The crowing out effect
6. State vs local fiscal policies
7. global event (such as weather)
Explain the crowding out effect - correct answer-
an increase in government spending causes a decrease in other spending
, it is more likely in times of inflation
X5 X5 X5 X5 X5 X5 X5
Explain the crowding in effect - correct answer-
X5 X5 X5 X5 X5 X5 X5
an increase in government spending causes an increase in other spending more
X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X
5 likely in times of recession
X5 X5 X5 X5
define deficit - correct answer-X5 X5 X5 X5
the amount by which the government;s expenditures (G) exceed government revenues during one fisc al
X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5
policy (usually one year) X5 X5 X5
define surplus - correct answer-X5 X5 X5 X5
the amount by which the government revenue exceed government expenditures (G) during one fiscal peri
X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5
od (usually one year)
X5 X5 X5
Define debt - correct answer- X5 X5 X5 X5
is the total value of the government;s indebtedness (total of all the deficits. cumulative)
X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5
What are the leading causes of public debt - correct answer-1. war
X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5
2. recession
3. fiscal policy X5
What are the determinants of consumption - correct answer-1. disposable income
X5 X5 X5 X5 X5 X5 X5 X5 X5 X5
2. wealth
3. future expectations X5
4. taxes
5. real interest rates X5 X5
as disposable income rises, consumption.... - correct answer-rises
X5 X5 X5 X5 X5 X5 X5
as wealth rises, consumption... - correct answer-rises
X5 X5 X5 X5 X5 X5
QUESTIONS WITH CORRECT ANSWERS
2026-2027
Define Fiscal Policy - correct answer-The government's plan for spending and taxation
If a country is in recession/unemployment: what are the fiscal solutions - correct answer-
Expansionary policy:
Increase government spending and decrease taxes
If a country is experience inflation: what fiscal solution should it use? - correct answer-
Contractionary policy: decrease government spending and increase taxes
What kind of effect (direct or indirect) does government spending have? - correct answer-
a direct effect
What kind of effect (direct or indirect) does taxes spending have? - correct answer-indirect effect
Do tax changes have a greater or lesser effect than government spending - correct answer-lesser
What are the glitches in Fiscal policy - correct answer-1. it takes time
2. economic needs change quickly
3. Bureaucracy
4. The crowding in effect
5. The crowing out effect
6. State vs local fiscal policies
7. global event (such as weather)
Explain the crowding out effect - correct answer-
an increase in government spending causes a decrease in other spending
, it is more likely in times of inflation
X5 X5 X5 X5 X5 X5 X5
Explain the crowding in effect - correct answer-
X5 X5 X5 X5 X5 X5 X5
an increase in government spending causes an increase in other spending more
X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X
5 likely in times of recession
X5 X5 X5 X5
define deficit - correct answer-X5 X5 X5 X5
the amount by which the government;s expenditures (G) exceed government revenues during one fisc al
X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5
policy (usually one year) X5 X5 X5
define surplus - correct answer-X5 X5 X5 X5
the amount by which the government revenue exceed government expenditures (G) during one fiscal peri
X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5
od (usually one year)
X5 X5 X5
Define debt - correct answer- X5 X5 X5 X5
is the total value of the government;s indebtedness (total of all the deficits. cumulative)
X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5
What are the leading causes of public debt - correct answer-1. war
X5 X5 X5 X5 X5 X5 X5 X5 X5 X5 X5
2. recession
3. fiscal policy X5
What are the determinants of consumption - correct answer-1. disposable income
X5 X5 X5 X5 X5 X5 X5 X5 X5 X5
2. wealth
3. future expectations X5
4. taxes
5. real interest rates X5 X5
as disposable income rises, consumption.... - correct answer-rises
X5 X5 X5 X5 X5 X5 X5
as wealth rises, consumption... - correct answer-rises
X5 X5 X5 X5 X5 X5
