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1) The government implements expansionary fiscal policies
to stimulate economic growth. Which of the following is
NOT a possible consequence of these policies?
a) Increased aggregate demand
b) Higher inflation rates
c) Lower interest rates
d) Reduced budget deficit
Answer: d) Reduced budget deficit
Rationale: Expansionary fiscal policies involve increasing
government spending and/or reducing taxes to boost
aggregate demand. This is typically done by increasing the
budget deficit, not reducing it.
2) What is the main goal of monetary policy in the context
of macroeconomics?
a) Maintaining price stability
b) Maximizing economic growth
c) Reducing income inequality
d) Controlling government expenditure
Answer: a) Maintaining price stability
Rationale: The main goal of monetary policy is to ensure
price stability by controlling inflation and preventing
excessive fluctuations in the money supply.
3) A country experiences a recession characterized by high
unemployment and low aggregate demand. Which of the
following fiscal policies can be used to counteract these
conditions?
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