Question 1

In the long run,what effect will an increase in taxes have?

Accepted Answer

A) increase unemployment 
B) increase SRAS 
C) decrease the price level 
D) decrease real output 
A) increase unemployment 
B) increase SRAS 
C) decrease the price level 
D) decrease real output

Question 2

When the crowding-out effect of a decrease in taxes is included in the analysis,what is the effect on AD?

Accepted Answer

A) AD doesn't change. 
B) AD shifts right. 
C) Any change in AD is indeterminate. 
D) AD shifts left. 
A) AD doesn't change. 
B) AD shifts right. 
C) Any change in AD is indeterminate. 
D) AD shifts left.

Question 3

What type of taxes are the GST,PST,and HST examples of?

Accepted Answer

A) Regressive 
B) Positive 
C) Negative 
D) Progressive 
A) Regressive 
B) Positive 
C) Negative 
D) Progressive

Question 4

If Canadian budget deficits (which require the borrowing of funds)raise interest rates and attract investment funds from abroad,what will the impact be on the foreign exchange value of the dollar and Canadian net exports?

Accepted Answer

A) The foreign exchange value of the dollar will depreciate, and Canadian net exports will increase. 
B) The foreign exchange value of the dollar will appreciate, and Canadian net exports will decrease. 
C) The foreign exchange value of the dollar will appreciate, and Canadian net exports (X - M) will increase. 
D) The foreign exchange value of the dollar will depreciate, and Canadian net exports will decrease. 
A) The foreign exchange value of the dollar will depreciate, and Canadian net exports will increase. 
B) The foreign exchange value of the dollar will appreciate, and Canadian net exports will decrease. 
C) The foreign exchange value of the dollar will appreciate, and Canadian net exports (X - M) will increase. 
D) The foreign exchange value of the dollar will depreciate, and Canadian net exports will decrease.

Question 5

If a foreign trading partner of Canada increases its budget deficit,raising interest rates in that country,what will the effect on Canadian exports and AD be?

Accepted Answer

A) Canadian exports will increase but AD will be unchanged. 
B) Canadian exports and AD will both tend to rise. 
C) Canadian exports and AD will both tend to fall. 
D) There will be an indeterminate effect on Canadian exports and AD. 
A) Canadian exports will increase but AD will be unchanged. 
B) Canadian exports and AD will both tend to rise. 
C) Canadian exports and AD will both tend to fall. 
D) There will be an indeterminate effect on Canadian exports and AD.

Question 6

How is the multiplier calculated?

Accepted Answer

A) (1 - MP
C)  / 1 
B) 1 / (change in MP
C)  
C) 1 / (1 - MP
C)  
D) 1 / MPC 
A) (1 - MP
C)  / 1 
B) 1 / (change in MP
C)  
C) 1 / (1 - MP
C)  
D) 1 / MPC

Question 7

If the government decides to spend an extra $5 billion on health care that they would otherwise have spent on road construction and the MPC is 0.75,what is the effect on AD?

Accepted Answer

A) It has no effect. 
B) It increases by $5 billion. 
C) It increases by $15 billion. 
D) It increases by $20 billion. 
A) It has no effect. 
B) It increases by $5 billion. 
C) It increases by $15 billion. 
D) It increases by $20 billion.

Question 8

In the long run,what effect will a decrease in government purchases have?

Accepted Answer

A) decrease real output 
B) shift LRAS to the left 
C) increase unemployment 
D) decrease the price level 
A) decrease real output 
B) shift LRAS to the left 
C) increase unemployment 
D) decrease the price level

Question 9

If the MPC is 0.4,more than half of the effect of an increase in government purchases on aggregate demand will come from increased consumption.

Accepted Answer

A) True 
 B)False

Question 10

What is the impact on disposable income and consumption when taxes are increased?

Accepted Answer

A) Disposable income increases, leading to a decrease in consumption. 
B) Disposable income decreases, leading to a decrease in consumption. 
C) Disposable income decreases, leading to an increase in consumption. 
D) Disposable income increases, leading to an increase in consumption. 
A) Disposable income increases, leading to a decrease in consumption. 
B) Disposable income decreases, leading to a decrease in consumption. 
C) Disposable income decreases, leading to an increase in consumption. 
D) Disposable income increases, leading to an increase in consumption.

Question 11

What are automatic stabilizers and how do they affect the economy? Which is the most important?

Accepted Answer

Automatic stabilizers are changes in gov

Question 12

Why doesn't the government print money in order to solve its debt problems?

Accepted Answer

Government could print more mo

Question 13

What is one of the real-world complexities of countercyclical fiscal policy?

Accepted Answer

A) There is uncertainty about when the economy is suffering a contraction. 
B) Fiscal policy is based on history, which is not foolproof. 
C) There is a lag between a change in fiscal policy and its effect. 
D) Governments cannot increase deficits very quickly. 
A) There is uncertainty about when the economy is suffering a contraction. 
B) Fiscal policy is based on history, which is not foolproof. 
C) There is a lag between a change in fiscal policy and its effect. 
D) Governments cannot increase deficits very quickly.

Question 14

When the economy is at full employment,expansionary fiscal policy will not change unemployment in the long run,but will increase the price level.

Accepted Answer

A) True 
 B)False

Question 15

What type of tax takes a lower percentage of high incomes as compared to lower incomes?

Accepted Answer

A) Progressive 
B) Regressive 
C) Proportional 
D) Negative 
A) Progressive 
B) Regressive 
C) Proportional 
D) Negative

Question 16

How did Canada's Economic Action Plan (2009)effect the AD/AS model?

Accepted Answer

A) It shifted the AS to the left. 
B) It shifted the AD to the right. 
C) It shifted the AD to the left. 
D) It shifted the AS to the right. 
A) It shifted the AS to the left. 
B) It shifted the AD to the right. 
C) It shifted the AD to the left. 
D) It shifted the AS to the right.

Question 17

You are a member of Parliament when the economy is in a recession.If your goal is to achieve a fully employed labour force,which of the following fiscal policy scenarios should you follow?

Accepted Answer

A) Raise government purchases, raise taxes by more than the increase in government purchases, and decrease transfer payments. 
B) Raise government purchases, reduce taxes, and/or increase transfer payments. 
C) Decrease government purchases, increase taxes, and/or cut transfer payments. 
D) Eliminate a federal budget deficit or add to a federal budget surplus. 
A) Raise government purchases, raise taxes by more than the increase in government purchases, and decrease transfer payments. 
B) Raise government purchases, reduce taxes, and/or increase transfer payments. 
C) Decrease government purchases, increase taxes, and/or cut transfer payments. 
D) Eliminate a federal budget deficit or add to a federal budget surplus.

Question 18

How does the multiplier work and what might government use it for?

Accepted Answer

The initial purchase of goods or service

Question 19

What impact does a larger crowding-out effect have on the magnitude of a given fiscal policy's effect on real output in the short run and net exports?

Accepted Answer

A) It increases the magnitude of a given fiscal policy's effect on real output in the short run and increases the magnitude of its effect on net exports. 
B) It increases the magnitude of a given fiscal policy's effect on real output in the short run and decreases the magnitude of its effect on net exports. 
C) It decreases the magnitude of a given fiscal policy's effect on real output in the short run and increases the magnitude of its effect on net exports. 
D) It decreases the magnitude of a given fiscal policy's effect on real output in the short run and decreases the magnitude of its effect on net exports. 
A) It increases the magnitude of a given fiscal policy's effect on real output in the short run and increases the magnitude of its effect on net exports. 
B) It increases the magnitude of a given fiscal policy's effect on real output in the short run and decreases the magnitude of its effect on net exports. 
C) It decreases the magnitude of a given fiscal policy's effect on real output in the short run and increases the magnitude of its effect on net exports. 
D) It decreases the magnitude of a given fiscal policy's effect on real output in the short run and decreases the magnitude of its effect on net exports.

Question 20

What will an increase in government purchases or a decrease in taxes,other things being equal,tend to do?

Accepted Answer

A) decrease interest rates and decrease investment 
B) increase interest rates and decrease investment 
C) decrease interest rates and increase investment 
D) increase interest rates and increase investment 
A) decrease interest rates and decrease investment 
B) increase interest rates and decrease investment 
C) decrease interest rates and increase investment 
D) increase interest rates and increase investment

In the long run,what effect will an increase in taxes have?

When the crowding-out effect of a decrease in taxes is included in the analysis,what is the effect on AD?

What type of taxes are the GST,PST,and HST examples of?

If Canadian budget deficits (which require the borrowing of funds)raise interest rates and attract investment funds from abroad,what will the impact be on the foreign exchange value of the dollar and Canadian net exports?

If a foreign trading partner of Canada increases its budget deficit,raising interest rates in that country,what will the effect on Canadian exports and AD be?

How is the multiplier calculated?

If the government decides to spend an extra $5 billion on health care that they would otherwise have spent on road construction and the MPC is 0.75,what is the effect on AD?

In the long run,what effect will a decrease in government purchases have?

If the MPC is 0.4,more than half of the effect of an increase in government purchases on aggregate demand will come from increased consumption.

What is the impact on disposable income and consumption when taxes are increased?

What are automatic stabilizers and how do they affect the economy? Which is the most important?

Why doesn't the government print money in order to solve its debt problems?

What is one of the real-world complexities of countercyclical fiscal policy?

When the economy is at full employment,expansionary fiscal policy will not change unemployment in the long run,but will increase the price level.

What type of tax takes a lower percentage of high incomes as compared to lower incomes?

How did Canada's Economic Action Plan (2009)effect the AD/AS model?

You are a member of Parliament when the economy is in a recession.If your goal is to achieve a fully employed labour force,which of the following fiscal policy scenarios should you follow?

How does the multiplier work and what might government use it for?

What impact does a larger crowding-out effect have on the magnitude of a given fiscal policy's effect on real output in the short run and net exports?

What will an increase in government purchases or a decrease in taxes,other things being equal,tend to do?

The Role and Method of Economics

Scarcity, trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Introduction to the Macroeconomy

Measuring Economic Performance

Economic Growth in the Global Economy

Aggregate Demand

Aggregate Supply and Macroeconomic Equilibrium

Money and the Banking System

The Bank of Canada

Monetary Policy

International Trade

International Finance

Filters

Exam 10: Fiscal Policy

In the long run,what effect will an increase in taxes have?

When the crowding-out effect of a decrease in taxes is included in the analysis,what is the effect on AD?

What type of taxes are the GST,PST,and HST examples of?

If Canadian budget deficits (which require the borrowing of funds)raise interest rates and attract investment funds from abroad,what will the impact be on the foreign exchange value of the dollar and Canadian net exports?

If a foreign trading partner of Canada increases its budget deficit,raising interest rates in that country,what will the effect on Canadian exports and AD be?

How is the multiplier calculated?

If the government decides to spend an extra $5 billion on health care that they would otherwise have spent on road construction and the MPC is 0.75,what is the effect on AD?

In the long run,what effect will a decrease in government purchases have?

If the MPC is 0.4,more than half of the effect of an increase in government purchases on aggregate demand will come from increased consumption.

What is the impact on disposable income and consumption when taxes are increased?

What are automatic stabilizers and how do they affect the economy? Which is the most important?

Why doesn't the government print money in order to solve its debt problems?

What is one of the real-world complexities of countercyclical fiscal policy?

When the economy is at full employment,expansionary fiscal policy will not change unemployment in the long run,but will increase the price level.

What type of tax takes a lower percentage of high incomes as compared to lower incomes?

How did Canada's Economic Action Plan (2009)effect the AD/AS model?

You are a member of Parliament when the economy is in a recession.If your goal is to achieve a fully employed labour force,which of the following fiscal policy scenarios should you follow?

How does the multiplier work and what might government use it for?

What impact does a larger crowding-out effect have on the magnitude of a given fiscal policy's effect on real output in the short run and net exports?

What will an increase in government purchases or a decrease in taxes,other things being equal,tend to do?

The Role and Method of Economics

Scarcity, trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Introduction to the Macroeconomy

Measuring Economic Performance

Economic Growth in the Global Economy

Aggregate Demand

Aggregate Supply and Macroeconomic Equilibrium

Money and the Banking System

The Bank of Canada

Monetary Policy

International Trade

International Finance

Filters