Question 1

Why does a larger government budget deficit increase the magnitude of the crowding-out effect?

Accepted Answer

The crowding-out effect states that as t

Question 2

In the short run,what would a decrease in net taxes (taxes minus transfer payments)do?

Accepted Answer

A) decrease any budget deficit or increase any budget surplus 
B) reduce unemployment 
C) reduce consumption purchases 
D) reduce the price level 
A) decrease any budget deficit or increase any budget surplus 
B) reduce unemployment 
C) reduce consumption purchases 
D) reduce the price level

Question 3

Figure 10-2
  
-Refer to Figure 10-2.If the economy is below full-employment real GDP,what will the new long-run equilibrium be if the government employs an expansionary fiscal policy?

Accepted Answer

A) E1 and RGDP₁ 
B) E2 and RGDP₁ 
C) E0 and RGDPNR 
D) E2 and RGDPNR 
A) E1 and RGDP₁ 
B) E2 and RGDP₁ 
C) E0 and RGDPNR 
D) E2 and RGDPNR

Question 4

When do budget surpluses exist?

Accepted Answer

A) when government spending equals its tax revenues 
B) when expansionary fiscal policies increase real GDP and the price level 
C) when government tax revenues exceed its spending 
D) when government spending exceeds its tax revenues 
A) when government spending equals its tax revenues 
B) when expansionary fiscal policies increase real GDP and the price level 
C) when government tax revenues exceed its spending 
D) when government spending exceeds its tax revenues

Question 5

When the economy is at or near full employment,economists generally agree that the multiplier is close to what number?

Accepted Answer

A) 0 
B) 3 
C) 7 
D) 10 
A) 0 
B) 3 
C) 7 
D) 10

Question 6

Which if the following is the most important automatic stabilizer?

Accepted Answer

A) the unemployment compensation system 
B) open market operations 
C) the welfare system 
D) the tax system 
A) the unemployment compensation system 
B) open market operations 
C) the welfare system 
D) the tax system

Question 7

What might the government do to offset the effect of a steep fall in net exports on the economy?

Accepted Answer

A) increase government purchases 
B) increase taxes 
C) decrease transfer payments 
D) decrease government purchases 
A) increase government purchases 
B) increase taxes 
C) decrease transfer payments 
D) decrease government purchases

Question 8

In 2010,which of the following counties had the highest central government debt as a percentage of GDP?

Accepted Answer

A) Australia 
B) Mexico 
C) Greece 
D) Norway 
A) Australia 
B) Mexico 
C) Greece 
D) Norway

Question 9

A cut in corporate profit taxes can lead to an increase in investment spending,aggregate demand and future economic growth.

Accepted Answer

A) True 
 B)False

Question 10

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 investment?

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 effects on investment. 
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 effects on investment. 
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 effects on investment. 
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 effects on investment. 
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 effects on investment. 
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 effects on investment. 
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 effects on investment. 
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 effects on investment.

Question 11

When government borrows,what is the impact on future generations?

Accepted Answer

A) They will inherit higher taxes. 
B) They will inherit greater quantities of vital infrastructure. 
C) They will inherit a lower tax liability. 
D) They will inherit neither higher taxes nor interest payment liability. 
A) They will inherit higher taxes. 
B) They will inherit greater quantities of vital infrastructure. 
C) They will inherit a lower tax liability. 
D) They will inherit neither higher taxes nor interest payment liability.

Question 12

When an economy is at less than full employment,what is the outcome of expansionary fiscal policies to employment,inflation,real output,and deficits (assuming no changes in tax rates)?

Accepted Answer

The aggregate demand will shift right.If

Question 13

If the marginal propensity to consume is 2/3,what is the multiplier?

Accepted Answer

A) 1.5 
B) 3 
C) 30 
D) 66 
A) 1.5 
B) 3 
C) 30 
D) 66

Question 14

How does the government use fiscal policy to regulate aggregate demand?

Accepted Answer

A) by manipulating the energy department 
B) by manipulating the money supply 
C) by manipulating taxation and spending 
D) by manipulating the treasury 
A) by manipulating the energy department 
B) by manipulating the money supply 
C) by manipulating taxation and spending 
D) by manipulating the treasury

Question 15

Which of the following is an example of a regressive tax?

Accepted Answer

A) a tax on gasoline 
B) a flat rate income tax 
C) the current Canadian federal income tax 
D) property taxes 
A) a tax on gasoline 
B) a flat rate income tax 
C) the current Canadian federal income tax 
D) property taxes

Question 16

What is the primary benefit of the automatic stabilizers?

Accepted Answer

A) They require legislative action, so there is a lag in the tool's response to fluctuations in the business cycle, and there is time to identify the spillover effects. 
B) They act to keep the economy at the full employment output level. 
C) They provide public assistance through legislative decision making. 
D) They require no new legislative action, so there is no legislative lag before these tools respond to fluctuations in the business cycle. 
A) They require legislative action, so there is a lag in the tool's response to fluctuations in the business cycle, and there is time to identify the spillover effects. 
B) They act to keep the economy at the full employment output level. 
C) They provide public assistance through legislative decision making. 
D) They require no new legislative action, so there is no legislative lag before these tools respond to fluctuations in the business cycle.

Question 17

What effect would an increase in transfer payments combined with a decrease in government purchases have on AD?

Accepted Answer

A) It would have an indeterminate effect on AD. 
B) It would increase AD. 
C) It would leave AD unchanged. 
D) It would decrease AD. 
A) It would have an indeterminate effect on AD. 
B) It would increase AD. 
C) It would leave AD unchanged. 
D) It would decrease AD.

Question 18

The crowding-out effect states that as the government borrows to pay for a deficit,it drives up the interest rates,which crowds out private spending and investment.

Accepted Answer

A) True 
 B)False

Question 19

What will be the impact on AD and the budget surplus if there is initially a federal budget surplus and government purchases rise while taxes fall?

Accepted Answer

A) AD decreases and the budget surplus increases. 
B) AD increases and the budget surplus decreases. 
C) AD decreases and the budget surplus decreases. 
D) AD increases and the budget surplus increases. 
A) AD decreases and the budget surplus increases. 
B) AD increases and the budget surplus decreases. 
C) AD decreases and the budget surplus decreases. 
D) AD increases and the budget surplus increases.

Question 20

Which of the following describes how the amount of employment insurance compensation and welfare payments are impacted by the state of the economy?

Accepted Answer

A) When the economy is in a recession, payments automatically decrease. 
B) When the economy enters a boom, payments automatically increase. 
C) When the economy is in a recession, payments automatically increase. 
D) When the economy goes into contraction, payments automatically decrease. 
A) When the economy is in a recession, payments automatically decrease. 
B) When the economy enters a boom, payments automatically increase. 
C) When the economy is in a recession, payments automatically increase. 
D) When the economy goes into contraction, payments automatically decrease.

Why does a larger government budget deficit increase the magnitude of the crowding-out effect?

In the short run,what would a decrease in net taxes (taxes minus transfer payments)do?

Figure 10-2 -Refer to Figure 10-2.If the economy is below full-employment real GDP,what will the new long-run equilibrium be if the government employs an expansionary fiscal policy?

When do budget surpluses exist?

When the economy is at or near full employment,economists generally agree that the multiplier is close to what number?

Which if the following is the most important automatic stabilizer?

What might the government do to offset the effect of a steep fall in net exports on the economy?

In 2010,which of the following counties had the highest central government debt as a percentage of GDP?

A cut in corporate profit taxes can lead to an increase in investment spending,aggregate demand and future economic growth.

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 investment?

When government borrows,what is the impact on future generations?

When an economy is at less than full employment,what is the outcome of expansionary fiscal policies to employment,inflation,real output,and deficits (assuming no changes in tax rates)?

If the marginal propensity to consume is 2/3,what is the multiplier?

How does the government use fiscal policy to regulate aggregate demand?

Which of the following is an example of a regressive tax?

What is the primary benefit of the automatic stabilizers?

What effect would an increase in transfer payments combined with a decrease in government purchases have on AD?

The crowding-out effect states that as the government borrows to pay for a deficit,it drives up the interest rates,which crowds out private spending and investment.

What will be the impact on AD and the budget surplus if there is initially a federal budget surplus and government purchases rise while taxes fall?

Which of the following describes how the amount of employment insurance compensation and welfare payments are impacted by the state of the economy?

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

Why does a larger government budget deficit increase the magnitude of the crowding-out effect?

In the short run,what would a decrease in net taxes (taxes minus transfer payments)do?

Figure 10-2 -Refer to Figure 10-2.If the economy is below full-employment real GDP,what will the new long-run equilibrium be if the government employs an expansionary fiscal policy?

When do budget surpluses exist?

When the economy is at or near full employment,economists generally agree that the multiplier is close to what number?

Which if the following is the most important automatic stabilizer?

What might the government do to offset the effect of a steep fall in net exports on the economy?

In 2010,which of the following counties had the highest central government debt as a percentage of GDP?

A cut in corporate profit taxes can lead to an increase in investment spending,aggregate demand and future economic growth.

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 investment?

When government borrows,what is the impact on future generations?

When an economy is at less than full employment,what is the outcome of expansionary fiscal policies to employment,inflation,real output,and deficits (assuming no changes in tax rates)?

If the marginal propensity to consume is 2/3,what is the multiplier?

How does the government use fiscal policy to regulate aggregate demand?

Which of the following is an example of a regressive tax?

What is the primary benefit of the automatic stabilizers?

What effect would an increase in transfer payments combined with a decrease in government purchases have on AD?

The crowding-out effect states that as the government borrows to pay for a deficit,it drives up the interest rates,which crowds out private spending and investment.

What will be the impact on AD and the budget surplus if there is initially a federal budget surplus and government purchases rise while taxes fall?

Which of the following describes how the amount of employment insurance compensation and welfare payments are impacted by the state of the economy?

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