Question 1

The government increases the tax rate on labour income.At the equilibrium level of employment, the before- tax wage rate _______ and the after- tax wage rate _______.

Accepted Answer

A) rises; rises 
B) rises; falls 
C) rises; does not change 
D) falls; rises 
E) falls; falls 
A) rises; rises 
B) rises; falls 
C) rises; does not change 
D) falls; rises 
E) falls; falls

Question 2

If we compare the United States to France, we see that potential GDP per person in France is _______ than that in the United States because the French tax wedge is _______ than the U.S.tax wedge.

Accepted Answer

A) greater; larger 
B) less; smaller 
C) greater; smaller 
D) less; larger 
E) none of the above 
A) greater; larger 
B) less; smaller 
C) greater; smaller 
D) less; larger 
E) none of the above

Question 3

Canada's Federal Budget of 2016 shows

Accepted Answer

A) a decreasing government debt. 
B) a government budget deficit. 
C) a government budget surplus. 
D) revenues greater than outlays. 
E) a balanced budget. 
A) a decreasing government debt. 
B) a government budget deficit. 
C) a government budget surplus. 
D) revenues greater than outlays. 
E) a balanced budget.

Question 4

When real GDP equals potential GDP of $12 trillion, the budget deficit is $1 trillion.Real GDP actually equals $14 trillion and the budget surplus is $3 trillion.The economy has a structural _______ and a cyclical _______ .

Accepted Answer

A) deficit of $1 trillion; surplus of $2 trillion 
B) deficit of $4 trillion; surplus of $1 trillion 
C) surplus of $3 trillion; surplus of $2 trillion 
D) deficit of $1 trillion; surplus of $4 trillion 
E) surplus of $4 trillion; deficit of $1 trillion 
A) deficit of $1 trillion; surplus of $2 trillion 
B) deficit of $4 trillion; surplus of $1 trillion 
C) surplus of $3 trillion; surplus of $2 trillion 
D) deficit of $1 trillion; surplus of $4 trillion 
E) surplus of $4 trillion; deficit of $1 trillion

Question 5

Which of the following is not a source of government revenues?

Accepted Answer

A) transfer payments 
B) indirect taxes 
C) corporate income taxes 
D) investment income 
E) personal income taxes 
A) transfer payments 
B) indirect taxes 
C) corporate income taxes 
D) investment income 
E) personal income taxes

Question 6

Expenditure on alternative energy and the nation's infrastructure _______ short- run aggregate supply and _______ potential GDP.

Accepted Answer

A) does not change; does not change 
B) increases; decreases 
C) increases; increases 
D) increases; does not change 
E) does not change; increases 
A) does not change; does not change 
B) increases; decreases 
C) increases; increases 
D) increases; does not change 
E) does not change; increases

Question 7

An increase in income taxes

Accepted Answer

A) decreases potential GDP because real GDP decreases when households have less disposable income to spend. 
B) increases potential GDP because workers have to work longer hours to maintain the same standard of living before the tax increase. 
C) does not affect potential GDP as long as the economy's endowments of resources and the state of technology remain unchanged. 
D) decreases potential GDP because workers' incentives to work are weakened. 
E) does not affect potential GDP because potential GDP depends on technology only. 
A) decreases potential GDP because real GDP decreases when households have less disposable income to spend. 
B) increases potential GDP because workers have to work longer hours to maintain the same standard of living before the tax increase. 
C) does not affect potential GDP as long as the economy's endowments of resources and the state of technology remain unchanged. 
D) decreases potential GDP because workers' incentives to work are weakened. 
E) does not affect potential GDP because potential GDP depends on technology only.

Question 8

If we compare Canada to France and the United Kingdom, Canada's tax wedge is _______  the French tax wedge and _______ the U.K. tax wedge.

Accepted Answer

A) smaller than; larger than 
B) equal to; larger than 
C) smaller than; smaller than 
D) larger than; larger than 
E) larger than; smaller than 
A) smaller than; larger than 
B) equal to; larger than 
C) smaller than; smaller than 
D) larger than; larger than 
E) larger than; smaller than

Question 9

All of the following statements are true except

Accepted Answer

A) total revenues have no strong trends. 
B) the main source of fluctuations in revenues is corporate income taxes. 
C) personal income taxes decreased during the 2000s. 
D) revenues include corporate income taxes, personal income taxes, indirect taxes, and investment and other income. 
E) indirect taxes decreased during the 2000s. 
A) total revenues have no strong trends. 
B) the main source of fluctuations in revenues is corporate income taxes. 
C) personal income taxes decreased during the 2000s. 
D) revenues include corporate income taxes, personal income taxes, indirect taxes, and investment and other income. 
E) indirect taxes decreased during the 2000s.

Question 10

At the end of 2015, the government of China's debt was ¥25.8 trillion.¥ is yuan, the currency of China).In 2016, the government spent ¥18.7 trillion and ended the year with a debt of ¥28 trillion.How much did the government receive in tax revenue in 2016?

Accepted Answer

A) ¥18.7 trillion 
B) ¥16.5 trillion 
C) ¥35.2 trillion 
D) ¥5,400 billion 
E) ¥2.2 trillion 
A) ¥18.7 trillion 
B) ¥16.5 trillion 
C) ¥35.2 trillion 
D) ¥5,400 billion 
E) ¥2.2 trillion

Question 11

The economy is in a recession, the recessionary gap is large, and there is a budget deficit.The budget deficit is _______.Automatic fiscal policy is _______the output gap.

Accepted Answer

A) totally composed of a cyclical deficit; decreasing 
B) totally composed of a cyclical deficit; increasing 
C) at least partly composed of a cyclical deficit; decreasing 
D) total composed of a structural deficit; increasing 
E) at least partly composed of a cyclical deficit; increasing 
A) totally composed of a cyclical deficit; decreasing 
B) totally composed of a cyclical deficit; increasing 
C) at least partly composed of a cyclical deficit; decreasing 
D) total composed of a structural deficit; increasing 
E) at least partly composed of a cyclical deficit; increasing

Question 12

Lowering taxes on employment _______ , which _______ the equilibrium quantity of labour.

Accepted Answer

A) increases the supply of labour and the demand for labour; increases 
B) decreases the supply of labour and increases the demand for labour; decreases 
C) increases the demand for labour; increases 
D) increases the supply of labour; increases 
E) decreases the demand for labour and increases the supply of labour; decreases 
A) increases the supply of labour and the demand for labour; increases 
B) decreases the supply of labour and increases the demand for labour; decreases 
C) increases the demand for labour; increases 
D) increases the supply of labour; increases 
E) decreases the demand for labour and increases the supply of labour; decreases

Question 13

As a percentage of provincial GDP, provincial government outlays are highest in

Accepted Answer

A) Newfoundland and Labrador. 
B) Ontario. 
C) Quebec. 
D) Nova Scotia. 
E) Alberta. 
A) Newfoundland and Labrador. 
B) Ontario. 
C) Quebec. 
D) Nova Scotia. 
E) Alberta.

Question 14

An increase in income tax _______ potential GDP by shifting the labour _______.

Accepted Answer

A) decreases; demand curve rightward 
B) increases; supply curve and labour demand curve rightward 
C) increases; supply curve rightward 
D) decreases; supply curve leftward 
E) increases; demand curve rightward 
A) decreases; demand curve rightward 
B) increases; supply curve and labour demand curve rightward 
C) increases; supply curve rightward 
D) decreases; supply curve leftward 
E) increases; demand curve rightward

Question 15

Choose the correct statement.

Accepted Answer

A) When an economy is in an above full- employment equilibrium, an increase in taxes will decrease aggregate demand, but because the autonomous tax multiplier is smaller than the government expenditure multiplier, the economy will not return to potential GDP. 
B) Automatic stimulus has no effect on a recessionary gap. 
C) Contractionary fiscal policy can eliminate inflationary pressure. 
D) Eliminating an inflationary gap is very simple - calculate the size of the gap and the size of the multiplier, then change government expenditure for an immediate decrease in real GDP. 
E) When an economy is in an above full- employment equilibrium, an equal decrease in government expenditure and autonomous taxes cannot return the economy to full employment. 
A) When an economy is in an above full- employment equilibrium, an increase in taxes will decrease aggregate demand, but because the autonomous tax multiplier is smaller than the government expenditure multiplier, the economy will not return to potential GDP. 
B) Automatic stimulus has no effect on a recessionary gap. 
C) Contractionary fiscal policy can eliminate inflationary pressure. 
D) Eliminating an inflationary gap is very simple - calculate the size of the gap and the size of the multiplier, then change government expenditure for an immediate decrease in real GDP. 
E) When an economy is in an above full- employment equilibrium, an equal decrease in government expenditure and autonomous taxes cannot return the economy to full employment.

Question 16

Use the figure below to answer the following questions.
   Figure 13.3.1
-Refer to Figure 13.3.1, which shows the outlays and revenues for the government of Pianoland.An automatic increase in tax revenues would be shown as a

Accepted Answer

A) shift upwards in the revenues curve. 
B) movement from left to right along the revenues curve. 
C) shift upwards in the the outlays curve. 
D) movement from left to right along the outlays curve. 
E) both A and C 
A) shift upwards in the revenues curve. 
B) movement from left to right along the revenues curve. 
C) shift upwards in the the outlays curve. 
D) movement from left to right along the outlays curve. 
E) both A and C

The government increases the tax rate on labour income.At the equilibrium level of employment, the before- tax wage rate _ and the after- tax wage rate _.

If we compare the United States to France, we see that potential GDP per person in France is _ than that in the United States because the French tax wedge is _ than the U.S.tax wedge.

Canada's Federal Budget of 2016 shows

When real GDP equals potential GDP of $12 trillion, the budget deficit is $1 trillion.Real GDP actually equals $14 trillion and the budget surplus is $3 trillion.The economy has a structural _ and a cyclical _ .

Which of the following is not a source of government revenues?

Expenditure on alternative energy and the nation's infrastructure _ short- run aggregate supply and _ potential GDP.

An increase in income taxes

If we compare Canada to France and the United Kingdom, Canada's tax wedge is _ the French tax wedge and _ the U.K. tax wedge.

All of the following statements are true except

At the end of 2015, the government of China's debt was ¥25.8 trillion.¥ is yuan, the currency of China).In 2016, the government spent ¥18.7 trillion and ended the year with a debt of ¥28 trillion.How much did the government receive in tax revenue in 2016?

The economy is in a recession, the recessionary gap is large, and there is a budget deficit.The budget deficit is _.Automatic fiscal policy is _the output gap.

Lowering taxes on employment _ , which _ the equilibrium quantity of labour.

As a percentage of provincial GDP, provincial government outlays are highest in

An increase in income tax _ potential GDP by shifting the labour _.

Choose the correct statement.

Use the figure below to answer the following questions. Figure 13.3.1 -Refer to Figure 13.3.1, which shows the outlays and revenues for the government of Pianoland.An automatic increase in tax revenues would be shown as a

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Monetary Policy

International Trade Policy

Filters

Exam 13: Fiscal Policy

The government increases the tax rate on labour income.At the equilibrium level of employment, the before- tax wage rate _______ and the after- tax wage rate _______.

If we compare the United States to France, we see that potential GDP per person in France is _______ than that in the United States because the French tax wedge is _______ than the U.S.tax wedge.

Canada's Federal Budget of 2016 shows

When real GDP equals potential GDP of $12 trillion, the budget deficit is $1 trillion.Real GDP actually equals $14 trillion and the budget surplus is $3 trillion.The economy has a structural _______ and a cyclical _______ .

Which of the following is not a source of government revenues?

Expenditure on alternative energy and the nation's infrastructure _______ short- run aggregate supply and _______ potential GDP.

An increase in income taxes

If we compare Canada to France and the United Kingdom, Canada's tax wedge is _______ the French tax wedge and _______ the U.K. tax wedge.

All of the following statements are true except

At the end of 2015, the government of China's debt was ¥25.8 trillion.¥ is yuan, the currency of China).In 2016, the government spent ¥18.7 trillion and ended the year with a debt of ¥28 trillion.How much did the government receive in tax revenue in 2016?

The economy is in a recession, the recessionary gap is large, and there is a budget deficit.The budget deficit is _______.Automatic fiscal policy is _______the output gap.

Lowering taxes on employment _______ , which _______ the equilibrium quantity of labour.

As a percentage of provincial GDP, provincial government outlays are highest in

An increase in income tax _______ potential GDP by shifting the labour _______.

Choose the correct statement.

Use the figure below to answer the following questions. Figure 13.3.1 -Refer to Figure 13.3.1, which shows the outlays and revenues for the government of Pianoland.An automatic increase in tax revenues would be shown as a

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Monetary Policy

International Trade Policy

Filters

The government increases the tax rate on labour income.At the equilibrium level of employment, the before- tax wage rate _ and the after- tax wage rate _.

If we compare the United States to France, we see that potential GDP per person in France is _ than that in the United States because the French tax wedge is _ than the U.S.tax wedge.

When real GDP equals potential GDP of $12 trillion, the budget deficit is $1 trillion.Real GDP actually equals $14 trillion and the budget surplus is $3 trillion.The economy has a structural _ and a cyclical _ .

Expenditure on alternative energy and the nation's infrastructure _ short- run aggregate supply and _ potential GDP.

If we compare Canada to France and the United Kingdom, Canada's tax wedge is _ the French tax wedge and _ the U.K. tax wedge.

The economy is in a recession, the recessionary gap is large, and there is a budget deficit.The budget deficit is _.Automatic fiscal policy is _the output gap.

Lowering taxes on employment _ , which _ the equilibrium quantity of labour.

An increase in income tax _ potential GDP by shifting the labour _.