Exam 7: Fiscal Policy

Below is some data for a hypothetical economy: -Refer to the information above to answer this question.If government increased both its spending and taxes by $60,what would be the new equilibrium income?

-Refer to the figure above to answer this question.Which of the following statements is verified by the graph?

Explain how the Government of Canada finances its budget deficits.

Since the end of World War II,what has happened to the public debt?

Suppose that counter-cyclical fiscal policy pushed up interest rates and the economy had a flexible exchange rate.Which of the following would be true?

Which of the following would help reduce an inflationary gap?

What would be appropriate government action to close an inflationary gap?

Assume that the economy is in a recession and the government is experiencing a budget deficit.What happens if balanced-budget fiscal policy is used to eliminate the deficit?

-Refer to the graph above to answer this question.What does this graph indicate?

Below is some information about the state of the budget and the economy. 1.A budget deficit and a recessionary gap. 2.A budget deficit and an inflationary gap. 3.A budget surplus and a recessionary gap. 4.A budget surplus and an inflationary gap. -Refer to the information above to answer this question.When would a counter-cyclical fiscal policy call for a decrease in government spending or a tax increase?

What is fiscal policy?

In trying to cure a recession,counter-cyclical fiscal policy may crowd out both private investment and export spending.

Suppose an economy is operating below Potential Real GDP and the government has a structural deficit equal to $100 billion.If the total government deficit is equal to $150 billion then the cyclical deficit is equal to:

Which of the following is a potential problem with a cyclically balanced-budget fiscal policy?

What is the redistribution effect of a high domestic-owned national debt?

Suppose MTR = 0.3 and G = $300 million for the economy of White Forest. a)At what level of GDP will White Forest have a balanced budget? b)At what level of GDP will White Forest have a budget surplus of $60 million? c)What is the balance of the government budget if the level of GDP is $900 million?

Given the following parameters for the economy of Pitris: a)What is the value of expenditures equilibrium? b)Does the government have a budget surplus or a budget deficit at expenditures equilibrium? What is the value of the budget surplus or deficit? c)What is the value of the multiplier?

Suppose an economy is operating above Potential Real GDP and the government has a structural surplus equal to $150 billion.If the total government surplus is equal to $170 billion then the cyclical surplus is equal to:

List the 5 potential problems associated with the national debt.

How would you graphically illustrate counter-cyclical fiscal policy used to eliminate an inflationary gap?