Exam 13: B: Fiscal Policy, Deficits, Surpluses, and Debt

The current popular view about the fiscal policy is that:

An expansionary fiscal policy in Canada might unintentionally cause demand-pull inflation if:

The cyclically adjusted deficit is the difference between annual government expenditures and tax revenues that would have occurred if the economy was:

If the policy makers implement a tax cut as a discretionary fiscal policy to combat a recessionary gap, it may fail to achieve its objective if:

If the economy is in a recession and prices are relatively stable, then the discretionary fiscal policy or policies that would most likely be recommended to correct this macroeconomic problem would be:

If a government wants to pursue an expansionary fiscal policy, then a tax cut of a certain size will be more expansionary the:

The actual budget may be in deficit while the full-employment budget is in surplus.

Discretionary fiscal policy is so named because it:

Refer to the above diagram wherein T is tax revenues and G is government expenditures.All figures are in billions.If GDP is $400:

Crowding out is a decrease in private investment caused by:

Tax revenues automatically increase during economic expansions and decrease during recessions.

The "crowding-out effect" suggests that:

A contractionary fiscal policy in Canada which reduces domestic interest rates is most likely to:

All else equal, a contractionary fiscal policy in Canada which reduces domestic interest rates tends to:

An inflationary gap can be restrained by increasing government spending and reducing taxes.

Due to automatic stabilizers, when income rises, government transfer spending:

Refer to the above diagram where T is tax revenues and G is government expenditures.All figures are in billions of dollars.If the full-employment GDP is $400 billion while the actual GDP is $200 billion, the:

In an aggregate demand and aggregate supply graph, a contractionary fiscal policy can be illustrated by a:

If the cyclically adjusted budget shows a deficit of about $100 billion and the actual budget shows a deficit of about $150 billion, it can be concluded that there is:

If government tax revenues change automatically and in a countercyclical direction over the course of the business cycle, this would be called a(n):