Question 1

To complement actions by the Bank of Canada to reduce inflation, the federal government can cut spending and/or raise taxes.

Accepted Answer

A) True 
 B)False

Question 2

The federal government debt fell during the period

Accepted Answer

A) 2008-2016. 
B) 1980-1992. 
C) during World War I and World War II. 
D) 2000-2008. 
E) the Great Depression. 
A) 2008-2016. 
B) 1980-1992. 
C) during World War I and World War II. 
D) 2000-2008. 
E) the Great Depression.

Question 3

Long lags associated with the legislative process in implementing fiscal policy make it more difficult to use than monetary policy.

Accepted Answer

A) True 
 B)False

Question 4

Expansionary fiscal policy involves increasing government purchases or increasing taxes.

Accepted Answer

A) True 
 B)False

Question 5

Economists who believe the supply-side effects of tax cuts are small essentially believe that

Accepted Answer

A) tax cuts mainly affect aggregate demand. 
B) tax cuts mainly affect aggregate supply. 
C) tax cuts will increase the quantity of labour supplied. 
D) tax cuts will result in relatively small changes in the price level. 
E) tax rates play a key role in determining the decisions of suppliers. 
A) tax cuts mainly affect aggregate demand. 
B) tax cuts mainly affect aggregate supply. 
C) tax cuts will increase the quantity of labour supplied. 
D) tax cuts will result in relatively small changes in the price level. 
E) tax rates play a key role in determining the decisions of suppliers.

Question 6

The larger the marginal propensity to import, the larger the government purchases multiplier.

Accepted Answer

A) True 
 B)False

Question 7

For the federal deficit to be lowered,

Accepted Answer

A) the federal government must decrease its spending and increase net exports. 
B) the federal government's expenditures must be lower than its tax revenue. 
C) the Bank of Canada must raise interest rates and lower the required reserve ratio. 
D) the Bank of Canada must reduce the money supply. 
E) the federal government must reduce expenditures and increase taxes. 
A) the federal government must decrease its spending and increase net exports. 
B) the federal government's expenditures must be lower than its tax revenue. 
C) the Bank of Canada must raise interest rates and lower the required reserve ratio. 
D) the Bank of Canada must reduce the money supply. 
E) the federal government must reduce expenditures and increase taxes.

Question 8

The double taxation problem occurs because households pay taxes on dividends and capital gains from stock, and they pay taxes on income.

Accepted Answer

A) True 
 B)False

Question 9

What is the government purchases multiplier if the tax rate is 0.2 and the marginal propensity to consume is 0.8? Assume the economy is closed.

Accepted Answer

A) 1 
B) 2.78 
C) 5 
D) 6.25 
E) 100 
A) 1 
B) 2.78 
C) 5 
D) 6.25 
E) 100

Question 10

Assuming a fixed amount of taxes and a closed economy, calculate the value of the government purchases multiplier, the tax multiplier, and the balanced budget multiplier if the marginal propensity to consume equals 0.75.

Accepted Answer

government purchases multiplie

Question 11

The tax multiplier is calculated as one minus the government purchases multiplier.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is considered contractionary fiscal policy?

Accepted Answer

A) Parliament increases the income tax rate. 
B) Parliament increases the Canada Health Transfer. 
C) Legislation removes a college tuition deduction from federal income taxes. 
D) The Ontario legislature cuts highway spending to balance its budget. 
E) The Saskatchewan government increases spending to clean up abandoned oil wells. 
A) Parliament increases the income tax rate. 
B) Parliament increases the Canada Health Transfer. 
C) Legislation removes a college tuition deduction from federal income taxes. 
D) The Ontario legislature cuts highway spending to balance its budget. 
E) The Saskatchewan government increases spending to clean up abandoned oil wells.

Question 13

Expansionary fiscal policy is used to increase aggregate demand in an attempt to fight rising inflation.

Accepted Answer

A) True 
 B)False

Question 14

Alberta suffered large declines in employment throughout 2015 and 2016. If the federal and provincial governments increased spending at the same time, the most likely effect (of those below)would be

Accepted Answer

A) an increase in people's incomes but declining health. 
B) a reduction in people's incomes and declining health. 
C) an increase in people's incomes and an improvement in their health. 
D) a reduction in peoples incomes and an improvement in their health. 
E) an increase in people's incomes and no change in their health. 
A) an increase in people's incomes but declining health. 
B) a reduction in people's incomes and declining health. 
C) an increase in people's incomes and an improvement in their health. 
D) a reduction in peoples incomes and an improvement in their health. 
E) an increase in people's incomes and no change in their health.

Question 15

If the federal government pursues an expansionary fiscal policy at the same time as the Bank of Canada pursues an expansionary monetary policy, how might the expansionary monetary policy affect the extent of crowding out in the short run?

Accepted Answer

An expansionary fiscal policy will cause

Question 16

The use of fiscal policy to stabilize the economy is limited because

Accepted Answer

A) changes in government spending and tax rates have a small effect on aggregate demand. 
B) changes in government spending and tax rates have a small effect on interest rates. 
C) the legislative process can be slow, which means that it is difficult to make fiscal policy actions in a timely way. 
D) the Canada Revenue Agency (CR
A) resists changes in tax rates because of all the changes they would have to make to the tax code. 
E) the federal government has very limited authority to engage in taxation and spending under the Constitution Act of 1982. 
A) changes in government spending and tax rates have a small effect on aggregate demand. 
B) changes in government spending and tax rates have a small effect on interest rates. 
C) the legislative process can be slow, which means that it is difficult to make fiscal policy actions in a timely way. 
D) the Canada Revenue Agency (CR
A) resists changes in tax rates because of all the changes they would have to make to the tax code. 
E) the federal government has very limited authority to engage in taxation and spending under the Constitution Act of 1982.

Question 17

Which of the following would be considered an active fiscal policy?

Accepted Answer

A) The Bank of Canada increases the money supply. 
B) Tax incentives are offered to encourage the purchase of fuel-efficient cars. 
C) Spending on military missions in Afghanistan is increased to promote national security. 
D) A tax cut is implemented to stimulate spending during a recession. 
E) The province of Ontario building new hockey rinks to encourage healthier living. 
A) The Bank of Canada increases the money supply. 
B) Tax incentives are offered to encourage the purchase of fuel-efficient cars. 
C) Spending on military missions in Afghanistan is increased to promote national security. 
D) A tax cut is implemented to stimulate spending during a recession. 
E) The province of Ontario building new hockey rinks to encourage healthier living.

Question 18

Tax reduction and simplification should ________ long-run aggregate supply and ________ aggregate demand.

Accepted Answer

A) increase; increase 
B) increase; decrease 
C) decrease; increase 
D) decrease; decrease 
A) increase; increase 
B) increase; decrease 
C) decrease; increase 
D) decrease; decrease

Question 19

Fiscal policy refers to changes in

Accepted Answer

A) provincial and local taxes and purchases that are intended to achieve social policy objectives. 
B) taxes and purchases that are intended to achieve macroeconomic policy objectives. 
C) federal taxes and purchases that are intended to fund tighter airport security. 
D) the money supply and interest rates that are intended to achieve macroeconomic policy objectives. 
E) credit conditions, such as the requirements to qualify for a mortgage. 
A) provincial and local taxes and purchases that are intended to achieve social policy objectives. 
B) taxes and purchases that are intended to achieve macroeconomic policy objectives. 
C) federal taxes and purchases that are intended to fund tighter airport security. 
D) the money supply and interest rates that are intended to achieve macroeconomic policy objectives. 
E) credit conditions, such as the requirements to qualify for a mortgage.

Question 20

Lowering the personal income tax will increase household disposable income and consumption spending.

Accepted Answer

A) True 
 B)False

To complement actions by the Bank of Canada to reduce inflation, the federal government can cut spending and/or raise taxes.

The federal government debt fell during the period

Long lags associated with the legislative process in implementing fiscal policy make it more difficult to use than monetary policy.

Expansionary fiscal policy involves increasing government purchases or increasing taxes.

Economists who believe the supply-side effects of tax cuts are small essentially believe that

The larger the marginal propensity to import, the larger the government purchases multiplier.

For the federal deficit to be lowered,

The double taxation problem occurs because households pay taxes on dividends and capital gains from stock, and they pay taxes on income.

What is the government purchases multiplier if the tax rate is 0.2 and the marginal propensity to consume is 0.8? Assume the economy is closed.

Assuming a fixed amount of taxes and a closed economy, calculate the value of the government purchases multiplier, the tax multiplier, and the balanced budget multiplier if the marginal propensity to consume equals 0.75.

The tax multiplier is calculated as one minus the government purchases multiplier.

Which of the following is considered contractionary fiscal policy?

Expansionary fiscal policy is used to increase aggregate demand in an attempt to fight rising inflation.

Alberta suffered large declines in employment throughout 2015 and 2016. If the federal and provincial governments increased spending at the same time, the most likely effect (of those below)would be

If the federal government pursues an expansionary fiscal policy at the same time as the Bank of Canada pursues an expansionary monetary policy, how might the expansionary monetary policy affect the extent of crowding out in the short run?

The use of fiscal policy to stabilize the economy is limited because

Which of the following would be considered an active fiscal policy?

Tax reduction and simplification should long-run aggregate supply and aggregate demand.

Fiscal policy refers to changes in

Lowering the personal income tax will increase household disposable income and consumption spending.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Supply and Demand

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Bank of Canada

Monetary Policy

Inflation, Unemployment, and Bank of Canada Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 12: Fiscal Policy

To complement actions by the Bank of Canada to reduce inflation, the federal government can cut spending and/or raise taxes.

The federal government debt fell during the period

Long lags associated with the legislative process in implementing fiscal policy make it more difficult to use than monetary policy.

Expansionary fiscal policy involves increasing government purchases or increasing taxes.

Economists who believe the supply-side effects of tax cuts are small essentially believe that

The larger the marginal propensity to import, the larger the government purchases multiplier.

For the federal deficit to be lowered,

The double taxation problem occurs because households pay taxes on dividends and capital gains from stock, and they pay taxes on income.

What is the government purchases multiplier if the tax rate is 0.2 and the marginal propensity to consume is 0.8? Assume the economy is closed.

Assuming a fixed amount of taxes and a closed economy, calculate the value of the government purchases multiplier, the tax multiplier, and the balanced budget multiplier if the marginal propensity to consume equals 0.75.

The tax multiplier is calculated as one minus the government purchases multiplier.

Which of the following is considered contractionary fiscal policy?

Expansionary fiscal policy is used to increase aggregate demand in an attempt to fight rising inflation.

Alberta suffered large declines in employment throughout 2015 and 2016. If the federal and provincial governments increased spending at the same time, the most likely effect (of those below)would be

If the federal government pursues an expansionary fiscal policy at the same time as the Bank of Canada pursues an expansionary monetary policy, how might the expansionary monetary policy affect the extent of crowding out in the short run?

The use of fiscal policy to stabilize the economy is limited because

Which of the following would be considered an active fiscal policy?

Tax reduction and simplification should ________ long-run aggregate supply and ________ aggregate demand.

Fiscal policy refers to changes in

Lowering the personal income tax will increase household disposable income and consumption spending.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Supply and Demand

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Bank of Canada

Monetary Policy

Inflation, Unemployment, and Bank of Canada Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Tax reduction and simplification should long-run aggregate supply and aggregate demand.