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AP® Macroeconomics

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Moderate

Fiscal Policy and MPS

APMACR-X6TKEJ

Suppose MPS was 0.2. If the economy was \$100 Billion short of full employment GDP and Congress wanted to bring about full employment then

A

Congress should approve 1% reduction in interest rates to stimulate the economy.

B

Congress should decrease banks reserve requirement by $100 Billion.

C

Congress should decrease payroll taxes by $100 Billion.

D

Congress should increase purchases of goods by $20 Billion.

E

Purchase $20 Billion in government securities on the Open Market.