Question 1

The aggregate demand curve will shift to the right ________ the initial decrease in taxes.

Accepted Answer

A) by less than 
B) by more than 
C) by the same amount 
D) sometimes by more than and other times by less than 
A) by less than 
B) by more than 
C) by the same amount 
D) sometimes by more than and other times by less than

Question 2

Suppose the federal government increases taxes by $500 million.Assume that taxes are fixed, the economy is closed, and the marginal propensity to consume is 0.75.What happens to equilibrium GDP?

Accepted Answer

A) There is a $2 billion increase in equilibrium GDP. 
B) There is a $2 billion decrease in equilibrium GDP. 
C) There is a $1.5 billion increase in equilibrium GDP. 
D) There is a $1.5 billion decrease in equilibrium GDP. 
E) There is a $500 million decrease in equilibrium GDP. 
A) There is a $2 billion increase in equilibrium GDP. 
B) There is a $2 billion decrease in equilibrium GDP. 
C) There is a $1.5 billion increase in equilibrium GDP. 
D) There is a $1.5 billion decrease in equilibrium GDP. 
E) There is a $500 million decrease in equilibrium GDP.

Question 3

Reducing the marginal tax rate on income will

Accepted Answer

A) reduce the tax wedge faced by workers and increase labour supplied. 
B) raise the return to entrepreneurship and encourage the opening of new businesses. 
C) increase the after-tax return on saving, and encourage saving. 
D) shift the aggregate supply curve to the right. 
E) All of the above are correct. 
A) reduce the tax wedge faced by workers and increase labour supplied. 
B) raise the return to entrepreneurship and encourage the opening of new businesses. 
C) increase the after-tax return on saving, and encourage saving. 
D) shift the aggregate supply curve to the right. 
E) All of the above are correct.

Question 4

Health care costs are likely to

Accepted Answer

A) decline in the future as more Canadians adopt healthier lifestyles. 
B) increase as the population ages. 
C) increase as more people immigrate to Canada. 
D) decline as the Canadian population gets younger on average. 
E) decline as Canadians are adopting healthier life styles. 
A) decline in the future as more Canadians adopt healthier lifestyles. 
B) increase as the population ages. 
C) increase as more people immigrate to Canada. 
D) decline as the Canadian population gets younger on average. 
E) decline as Canadians are adopting healthier life styles.

Question 5

Suppose that the federal government allocates $100 million to clean up after a record snowfall bury the Maritimes.It also raises taxes by $100 million to keep the deficit from growing.If the marginal propensity to consume is 0.9, what is the effect on equilibrium GDP?

Accepted Answer

A) GDP does not change. 
B) GDP increases by $10 million. 
C) GDP increases by $90 million. 
D) GDP increases by $100 million. 
E) GDP decreases by $10 million. 
A) GDP does not change. 
B) GDP increases by $10 million. 
C) GDP increases by $90 million. 
D) GDP increases by $100 million. 
E) GDP decreases by $10 million.

Question 6

Since 1975, the federal government budget was in surplus during

Accepted Answer

A) 1981 through 1985. 
B) 1990 through 1997. 
C) 1998 through 2008. 
D) 1980 through 1989. 
E) 2009 through 2016. 
A) 1981 through 1985. 
B) 1990 through 1997. 
C) 1998 through 2008. 
D) 1980 through 1989. 
E) 2009 through 2016.

Question 7

What is expansionary fiscal policy? What is contractionary fiscal policy?

Accepted Answer

An expansionary fiscal policy is a decre

Question 8

Some economists argue that the federal government should normally run a deficit at potential GDP, with the borrowed funds applied to

Accepted Answer

A) consumption goods. 
B) investment goods. 
C) social security benefits. 
D) health care costs. 
E) imported goods. 
A) consumption goods. 
B) investment goods. 
C) social security benefits. 
D) health care costs. 
E) imported goods.

Question 9

Accumulating debt poses a problem for the Canadian federal government because

Accepted Answer

A) it is currently in danger of defaulting on on the debt. 
B) a large debt-to-GDP ratio causes crowding out. 
C) building roads and bridges do not yield enough benefits to justify their cost. 
D) the debt has to ultimately be paid off. 
E) a large debt-to-GDP ratio discourages imports. 
A) it is currently in danger of defaulting on on the debt. 
B) a large debt-to-GDP ratio causes crowding out. 
C) building roads and bridges do not yield enough benefits to justify their cost. 
D) the debt has to ultimately be paid off. 
E) a large debt-to-GDP ratio discourages imports.

Question 10

Assume a closed economy with fixed taxes and the marginal propensity to consume is equal to 0.9.What is the government spending multiplier?

Accepted Answer

A) 10 
B) 9 
C) 5 
D) 1 
E) 0)1 
A) 10 
B) 9 
C) 5 
D) 1 
E) 0)1

Question 11

If we consider the potential effects of a proposed new government spending program supported by a tax increase, we would expect crowding out to be

Accepted Answer

A) greater than it would be without the supply-side effects. 
B) increased as aggregate real income and output rise in the long run. 
C) unaffected by the shifting long-run aggregate supply curve. 
D) dependent upon the impact of this tax change on consumer disposable income. 
E) greater than if it were not supported by a tax increase. 
A) greater than it would be without the supply-side effects. 
B) increased as aggregate real income and output rise in the long run. 
C) unaffected by the shifting long-run aggregate supply curve. 
D) dependent upon the impact of this tax change on consumer disposable income. 
E) greater than if it were not supported by a tax increase.

Question 12

An increase in government spending increases the supply of money in our economy.

Accepted Answer

A) True 
 B)False

Question 13

Suppose real GDP is $1.4 trillion and potential GDP is $1.9 trillion.To move the economy back to potential GDP, the federal government should

Accepted Answer

A) lower taxes by an amount less than $500 billion. 
B) raise government purchases by $500 billion. 
C) raise government purchases by more than $500 billion. 
D) lower taxes by $500 billion. 
E) lower government purchases by $500 billion. 
A) lower taxes by an amount less than $500 billion. 
B) raise government purchases by $500 billion. 
C) raise government purchases by more than $500 billion. 
D) lower taxes by $500 billion. 
E) lower government purchases by $500 billion.

Question 14

The government purchases multiplier is defined as

Accepted Answer

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

Question 15

Which of the following is a government expenditure but is not a government purchase?

Accepted Answer

A) The federal government buys a Hummer for the military. 
B) The federal government pays the salary of a Canadian Security and Intelligence Service (CSIS)agent. 
C) The federal government pays out an employment insurance claim. 
D) The federal government pays to support research on cancer. 
E) The federal government pays a professional photographer to take pictures of the Prime Minister. 
A) The federal government buys a Hummer for the military. 
B) The federal government pays the salary of a Canadian Security and Intelligence Service (CSIS)agent. 
C) The federal government pays out an employment insurance claim. 
D) The federal government pays to support research on cancer. 
E) The federal government pays a professional photographer to take pictures of the Prime Minister.

Question 16

A tax rebate, which is expected to be offered in this and all future years, will

Accepted Answer

A) have a small positive effect on consumption and aggregate demand. 
B) have no effect on consumption and aggregate demand. 
C) have a significant positive effect on consumption and aggregate demand, with aggregate demand growing by a multiple of the tax rebate. 
D) increase aggregate supply and aggregate demand. 
E) have a significant effect on aggregate supply, with firms expanding by a multiple of the increased tax take. 
A) have a small positive effect on consumption and aggregate demand. 
B) have no effect on consumption and aggregate demand. 
C) have a significant positive effect on consumption and aggregate demand, with aggregate demand growing by a multiple of the tax rebate. 
D) increase aggregate supply and aggregate demand. 
E) have a significant effect on aggregate supply, with firms expanding by a multiple of the increased tax take.

Question 17

Economists refer to the series of induced increases in consumption spending that result from an initial increase in autonomous expenditures as the ________ effect.

Accepted Answer

A) multiplier 
B) expenditure 
C) consumption 
D) aggregate demand 
E) Keynes 
A) multiplier 
B) expenditure 
C) consumption 
D) aggregate demand 
E) Keynes

Question 18

What is the difference between federal purchases and federal expenditures?

Accepted Answer

Federal purchases refer to federal spend

Question 19

Use the dynamic aggregate demand and aggregate supply model and start with Year 1 in a long-run macroeconomic equilibrium.For Year 2, graph aggregate demand, long-run aggregate supply, and short-run aggregate supply such that the condition of the economy will induce Parliament to conduct expansionary fiscal policy.Briefly explain the condition of the economy and what Parliament is attempting to do.

Accepted Answer

The Parliament conduct expansionary fisc

Question 20

A law requiring the government to balance its budget in each year would serve as an automatic destabilizer.

Accepted Answer

A) True 
 B)False

The aggregate demand curve will shift to the right ________ the initial decrease in taxes.

Suppose the federal government increases taxes by $500 million.Assume that taxes are fixed, the economy is closed, and the marginal propensity to consume is 0.75.What happens to equilibrium GDP?

Reducing the marginal tax rate on income will

Health care costs are likely to

Suppose that the federal government allocates $100 million to clean up after a record snowfall bury the Maritimes.It also raises taxes by $100 million to keep the deficit from growing.If the marginal propensity to consume is 0.9, what is the effect on equilibrium GDP?

Since 1975, the federal government budget was in surplus during

What is expansionary fiscal policy? What is contractionary fiscal policy?

Some economists argue that the federal government should normally run a deficit at potential GDP, with the borrowed funds applied to

Accumulating debt poses a problem for the Canadian federal government because

Assume a closed economy with fixed taxes and the marginal propensity to consume is equal to 0.9.What is the government spending multiplier?

If we consider the potential effects of a proposed new government spending program supported by a tax increase, we would expect crowding out to be

An increase in government spending increases the supply of money in our economy.

Suppose real GDP is $1.4 trillion and potential GDP is $1.9 trillion.To move the economy back to potential GDP, the federal government should

The government purchases multiplier is defined as

Which of the following is a government expenditure but is not a government purchase?

A tax rebate, which is expected to be offered in this and all future years, will

Economists refer to the series of induced increases in consumption spending that result from an initial increase in autonomous expenditures as the ________ effect.

What is the difference between federal purchases and federal expenditures?

A law requiring the government to balance its budget in each year would serve as an automatic destabilizer.

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 aggregate demand curve will shift to the right ________ the initial decrease in taxes.

Suppose the federal government increases taxes by $500 million.Assume that taxes are fixed, the economy is closed, and the marginal propensity to consume is 0.75.What happens to equilibrium GDP?

Reducing the marginal tax rate on income will

Health care costs are likely to

Suppose that the federal government allocates $100 million to clean up after a record snowfall bury the Maritimes.It also raises taxes by $100 million to keep the deficit from growing.If the marginal propensity to consume is 0.9, what is the effect on equilibrium GDP?

Since 1975, the federal government budget was in surplus during

What is expansionary fiscal policy? What is contractionary fiscal policy?

Some economists argue that the federal government should normally run a deficit at potential GDP, with the borrowed funds applied to

Accumulating debt poses a problem for the Canadian federal government because

Assume a closed economy with fixed taxes and the marginal propensity to consume is equal to 0.9.What is the government spending multiplier?

If we consider the potential effects of a proposed new government spending program supported by a tax increase, we would expect crowding out to be

An increase in government spending increases the supply of money in our economy.

Suppose real GDP is $1.4 trillion and potential GDP is $1.9 trillion.To move the economy back to potential GDP, the federal government should

The government purchases multiplier is defined as

Which of the following is a government expenditure but is not a government purchase?

A tax rebate, which is expected to be offered in this and all future years, will

Economists refer to the series of induced increases in consumption spending that result from an initial increase in autonomous expenditures as the ________ effect.

What is the difference between federal purchases and federal expenditures?

A law requiring the government to balance its budget in each year would serve as an automatic destabilizer.

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