Question 1

The double taxation problem occurs because households pay taxes on dividends and capital gains from stock and corporations pay taxes on corporate profits.

Accepted Answer

A) True 
 B)False

Question 2

What are the key differences between how we illustrate a contractionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

Accepted Answer

In the basic aggregate demand and aggreg

Question 3

The tax multiplier

Accepted Answer

A) is negative. 
B) is larger in absolute value as compared to the government spending multiplier. 
C) is a measure of how much taxes will fall when income is falling. 
D) is always less than one. 
E) increases with the size of the economy. 
A) is negative. 
B) is larger in absolute value as compared to the government spending multiplier. 
C) is a measure of how much taxes will fall when income is falling. 
D) is always less than one. 
E) increases with the size of the economy.

Question 4

Government spending on health care will likely

Accepted Answer

A) decrease as the population ages. 
B) remain constant as the population ages. 
C) increase as the population ages. 
D) become unaffordable no matter what we do. 
E) fall has people become healthier over time. 
A) decrease as the population ages. 
B) remain constant as the population ages. 
C) increase as the population ages. 
D) become unaffordable no matter what we do. 
E) fall has people become healthier over time.

Question 5

Figure 12.3   Alt text for Figure 12.3: In figure 12.3, a graph comparing real GDP and price level.
Long description for Figure 12.3: The x-axis is labelled, real GDP (trillions of 2007 dollars)and the y-axis is labelled, price level (CPI).4 lines are shown; AD1, AD2, LRAS, and SRAS.Line AD1 begins at the top left corner and slopes down to the end of the x-axis.Line AD2 follows the same slope as line AD1, but is plotted to the right.Line SRAS begins close to the vertex and slopes up to the top right corner.Line LRAS is perpendicular to the x-axis and passes through point B.Lines AD1 and SRAS intersect at point A.Lines AD2, LRAS, and SRAS intersect at point B.
-Refer to Figure 12.3.In the graph above, suppose the economy is initially at point A.The movement of the economy to point B as shown in the graph illustrates the effect of which of the following policy actions by the federal government?

Accepted Answer

A) a decrease in income taxes 
B) a decrease in interest rates 
C) a decrease in government purchases 
D) an increase in the money supply 
E) an increase in the number of national statutory holidays 
A) a decrease in income taxes 
B) a decrease in interest rates 
C) a decrease in government purchases 
D) an increase in the money supply 
E) an increase in the number of national statutory holidays

Question 6

During recessions, government expenditure automatically

Accepted Answer

A) falls because of programs such as employment insurance. 
B) rises because of programs such as employment insurance. 
C) falls because of the progressive income tax system. 
D) rises because of the progressive income tax system. 
E) rises because of transfers to provincial governments. 
A) falls because of programs such as employment insurance. 
B) rises because of programs such as employment insurance. 
C) falls because of the progressive income tax system. 
D) rises because of the progressive income tax system. 
E) rises because of transfers to provincial governments.

Question 7

Included in government expenditures are government purchases and transfer payments.

Accepted Answer

A) True 
 B)False

Question 8

What is the "tax wedge"?

Accepted Answer

The "tax wedge" is t

Question 9

List the major categories of federal government expenditures.

Accepted Answer

1.Defense and public safety
2.

Question 10

The government purchases multiplier will be larger if the marginal income tax rate decreases.

Accepted Answer

A) True 
 B)False

Question 11

Based on supply-side effects, lower marginal tax rates in Canada result in a ________ tax wedge and a ________ labour supply.

Accepted Answer

A) higher; larger 
B) lower; larger 
C) higher; smaller 
D) lower; smaller 
A) higher; larger 
B) lower; larger 
C) higher; smaller 
D) lower; smaller

Question 12

What are the key differences between how we illustrate an expansionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

Accepted Answer

In the basic aggregate demand and aggreg

Question 13

Contractionary fiscal policy involves decreasing government purchases or increasing taxes.

Accepted Answer

A) True 
 B)False

Question 14

Crowding out will be greater

Accepted Answer

A) the less sensitive consumption spending is to changes in the interest rate. 
B) the further equilibrium GDP is below potential GDP. 
C) the more sensitive investment spending is to changes in the interest rate. 
D) if the economy is in recession, rather than at full employment. 
E) the more sensitive consumers are to changes in the tax rate. 
A) the less sensitive consumption spending is to changes in the interest rate. 
B) the further equilibrium GDP is below potential GDP. 
C) the more sensitive investment spending is to changes in the interest rate. 
D) if the economy is in recession, rather than at full employment. 
E) the more sensitive consumers are to changes in the tax rate.

Question 15

Assume a country is required by law to balance the budget every year.Suppose aggregate demand falls, causing a recession and a budget deficit.To balance the budget, what would the government need to do with the level of government spending and taxes? How would these changes in government spending and taxes affect aggregate demand and the economy?

Accepted Answer

To balance the budget, the gov

Question 16

The level of crowding out associated with a tax cut will be smaller if the tax change has a supply-side effect than it will be if it only has a demand-side effect.

Accepted Answer

A) True 
 B)False

Question 17

What is the government purchases multiplier if the tax rate is 0.1 and the marginal propensity to consume is 0.9? Assume the economy is closed.

Accepted Answer

A) 2.5 
B) 5.3 
C) 10 
D) 11.1 
E) 100 
A) 2.5 
B) 5.3 
C) 10 
D) 11.1 
E) 100

Question 18

A decrease in the marginal income tax rate is a fiscal policy which will increase aggregate demand.

Accepted Answer

A) True 
 B)False

Question 19

To evaluate the size of the federal budget deficit or surplus over time, it would be best to look at the

Accepted Answer

A) absolute size of the budget deficit or surplus. 
B) budget deficit or surplus as a percentage of GDP. 
C) budget deficit or surplus as a percentage of tax revenues. 
D) budget deficit or surplus as a percentage of government spending. 
E) budget deficit or surplus per capita. 
A) absolute size of the budget deficit or surplus. 
B) budget deficit or surplus as a percentage of GDP. 
C) budget deficit or surplus as a percentage of tax revenues. 
D) budget deficit or surplus as a percentage of government spending. 
E) budget deficit or surplus per capita.

Question 20

Figure 12.1   Alt text for Figure 12.1: In figure 12.1, a graph comparing real GDP and price level.
Long description for Figure 12.1: The x-axis is labelled, real GDP (trillions of 2007 dollars)and the y-axis is labelled, price level (CPI).5 lines are shown; AD1, AD2, AD3, LRAS, and SRAS1.Line AD1 begins in the top left corner and slopes down to the end of the x-axis.Line AD2 follows the same slope, but is plotted to the right.Similarly, line AD3 also has the same slope and is plotted to the right of AD2.Line SRAS1 begins close to the vertex and slopes up to the top right corner.Line LRAS is perpendicular to the x-axis, passing through points D, B, and E.Lines AD1 and SRAS1 intersect at point A.Lines AD2, LRAS, and SRAS1 intersect at point B.Lines AD3 and SRAS1 intersect at point C.Lines AD1 and LRAS intersect at point E.Lines AD3 and LRAS intersect at point D.The area between lines AD1 and AD2 is indicated by a right pointing arrow.The area between lines AD2 and AD3 is indicated by a right pointing arrow.
-Refer to Figure 12.1.Suppose the economy is in a recession and expansionary fiscal policy is pursued.Using the static AD-AS model in the figure above, this would be depicted as a movement from

Accepted Answer

A) A to B. 
B) B to C. 
C) C to B. 
D) B to A. 
E) A to E. 
A) A to B. 
B) B to C. 
C) C to B. 
D) B to A. 
E) A to E.

The double taxation problem occurs because households pay taxes on dividends and capital gains from stock and corporations pay taxes on corporate profits.

What are the key differences between how we illustrate a contractionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

The tax multiplier

Government spending on health care will likely

During recessions, government expenditure automatically

Included in government expenditures are government purchases and transfer payments.

What is the "tax wedge"?

List the major categories of federal government expenditures.

The government purchases multiplier will be larger if the marginal income tax rate decreases.

Based on supply-side effects, lower marginal tax rates in Canada result in a tax wedge and a labour supply.

What are the key differences between how we illustrate an expansionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

Contractionary fiscal policy involves decreasing government purchases or increasing taxes.

Crowding out will be greater

The level of crowding out associated with a tax cut will be smaller if the tax change has a supply-side effect than it will be if it only has a demand-side effect.

What is the government purchases multiplier if the tax rate is 0.1 and the marginal propensity to consume is 0.9? Assume the economy is closed.

A decrease in the marginal income tax rate is a fiscal policy which will increase aggregate demand.

To evaluate the size of the federal budget deficit or surplus over time, it would be best to look at the

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

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Exam 12: Fiscal Policy

The double taxation problem occurs because households pay taxes on dividends and capital gains from stock and corporations pay taxes on corporate profits.

What are the key differences between how we illustrate a contractionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

The tax multiplier

Government spending on health care will likely

During recessions, government expenditure automatically

Included in government expenditures are government purchases and transfer payments.

What is the "tax wedge"?

List the major categories of federal government expenditures.

The government purchases multiplier will be larger if the marginal income tax rate decreases.

Based on supply-side effects, lower marginal tax rates in Canada result in a ________ tax wedge and a ________ labour supply.

What are the key differences between how we illustrate an expansionary fiscal policy in the basic aggregate demand and aggregate supply model and in the dynamic aggregate demand and aggregate supply model?

Contractionary fiscal policy involves decreasing government purchases or increasing taxes.

Crowding out will be greater

The level of crowding out associated with a tax cut will be smaller if the tax change has a supply-side effect than it will be if it only has a demand-side effect.

What is the government purchases multiplier if the tax rate is 0.1 and the marginal propensity to consume is 0.9? Assume the economy is closed.

A decrease in the marginal income tax rate is a fiscal policy which will increase aggregate demand.

To evaluate the size of the federal budget deficit or surplus over time, it would be best to look at the

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

Based on supply-side effects, lower marginal tax rates in Canada result in a tax wedge and a labour supply.