Question 1

What are the problems associated with a cyclically balanced budget fiscal policy?

Accepted Answer

There are three problems with a cyclical

Question 2

Which of the following is one of the reasons why the Canadian government went from budget deficits to budget surpluses in the late 1990s?

Accepted Answer

A) Declining GDP. 
B) Higher corporate tax rates. 
C) Increased program spending. 
D) Decreased transfer payments to the provinces for health and education. 
E) Elimination of the national debt has eliminated interest payments. 
A) Declining GDP. 
B) Higher corporate tax rates. 
C) Increased program spending. 
D) Decreased transfer payments to the provinces for health and education. 
E) Elimination of the national debt has eliminated interest payments.

Question 3

Assume the economy is experiencing an inflationary gap and the government has a budget surplus.Which of the following is a correct example of counter-cyclical fiscal policy with the corresponding effect on the budget?

Accepted Answer

A) Government spending increases causing a smaller budget surplus. 
B) Government spending increases causing a larger budget surplus. 
C) Tax rates decrease causing a smaller budget surplus. 
D) Government spending decreases causing a larger budget surplus. 
E) Transfer payments and tax rates both decrease. 
A) Government spending increases causing a smaller budget surplus. 
B) Government spending increases causing a larger budget surplus. 
C) Tax rates decrease causing a smaller budget surplus. 
D) Government spending decreases causing a larger budget surplus. 
E) Transfer payments and tax rates both decrease.

Question 4

What is the primary goal of a balanced budget fiscal policy? What is the major criticism of it?

Accepted Answer

The primary goal of a balanced-budget fi

Question 5

Those who advocate counter-cyclical fiscal policy would agree with all but one of the following statements.Which is the exception?

Accepted Answer

A) Governments should be non-interventionist. 
B) Automatic stabilizers are not particularly effective. 
C) The economy is not capable of automatic self-adjustment in response the problems of unemployment and inflation. 
D) Counter cyclical fiscal policy is a powerful and effective tool. 
E) Government budget deficits are a less serious problem than income gaps. 
A) Governments should be non-interventionist. 
B) Automatic stabilizers are not particularly effective. 
C) The economy is not capable of automatic self-adjustment in response the problems of unemployment and inflation. 
D) Counter cyclical fiscal policy is a powerful and effective tool. 
E) Government budget deficits are a less serious problem than income gaps.

Question 6

Which of the following statements is an accurate comment on the payment of interest on the public debt?

Accepted Answer

A) It leads to an increase in our standard of living. 
B) It has no effect on the distribution of income. 
C) It probably decreases income inequality. 
D) It probably increases income inequality. 
E) It decreases the value of a country's assets. 
A) It leads to an increase in our standard of living. 
B) It has no effect on the distribution of income. 
C) It probably decreases income inequality. 
D) It probably increases income inequality. 
E) It decreases the value of a country's assets.

Question 7

Assume that the economy is at full employment.
a)Explain the effect to the economy if there is a decrease in investment spending.
b)Explain how countercyclical fiscal policy will adjust the economy back to full employment.

Accepted Answer

a)A decrease in investment spending will

Question 8

What is the primary goal of counter-cyclical fiscal policy? What are three criticisms of it?

Accepted Answer

The primary goal of counter-cyclical fis

Question 9

What is a balanced budget?

Accepted Answer

A) It is the equality of tax revenues and government spending on goods and services. 
B) It is the equality of net tax revenues and government spending on goods and services 
C) It is the absence of government debt. 
D) It is a budget where the government spends over many categories in a balanced fashion. 
A) It is the equality of tax revenues and government spending on goods and services. 
B) It is the equality of net tax revenues and government spending on goods and services 
C) It is the absence of government debt. 
D) It is a budget where the government spends over many categories in a balanced fashion.

Question 10

All of the following,except one,are examples of automatic stabilizers.Which is the exception?

Accepted Answer

A) Progressive income taxes. 
B) Expenditures on education which automatically rise when the number of school-aged children increases. 
C) Welfare payments which increase when the economy suffers a recession. 
D) Employment insurance which decreases when the economy is doing well. 
A) Progressive income taxes. 
B) Expenditures on education which automatically rise when the number of school-aged children increases. 
C) Welfare payments which increase when the economy suffers a recession. 
D) Employment insurance which decreases when the economy is doing well.

Question 11

Assume that the economy is at full employment.
a)Explain the effect to the economy if there is an increase in foreign income.
b)Explain how countercyclical fiscal policy will adjust the economy back to full employment.

Accepted Answer

a)An increase in foreign income will inc

Question 12

What is the effect of a decrease in both government spending and taxes by the same amount?

Accepted Answer

A) GDP will fall but unemployment will rise. 
B) GDP will rise and unemployment will fall. 
C) Both GDP and unemployment will fall. 
D) Both GDP and unemployment will rise. 
E) There will be no effect on GDP or unemployment. 
A) GDP will fall but unemployment will rise. 
B) GDP will rise and unemployment will fall. 
C) Both GDP and unemployment will fall. 
D) Both GDP and unemployment will rise. 
E) There will be no effect on GDP or unemployment.

Question 13

All of the following,except one,would result from expansionary fiscal policy.Which is the exception?

Accepted Answer

A) Increased GDP. 
B) Increased price level. 
C) Decreased unemployment. 
D) Decreased budget deficit. 
A) Increased GDP. 
B) Increased price level. 
C) Decreased unemployment. 
D) Decreased budget deficit.

Question 14

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

Accepted Answer

A) That net tax revenues,government spending and the government's budget all depend on the level of real GDP. 
B) That the state of the government's budget depends on the level of real GDP as well as on tax rates and its own spending. 
C) That the level of real GDP depends on the slope of the budget line. 
D) That real GDP level Y2 is equilibrium GDP. 
E) That real GDP level Y2 is both equilibrium GDP and a balanced budget. 
A) That net tax revenues,government spending and the government's budget all depend on the level of real GDP. 
B) That the state of the government's budget depends on the level of real GDP as well as on tax rates and its own spending. 
C) That the level of real GDP depends on the slope of the budget line. 
D) That real GDP level Y2 is equilibrium GDP. 
E) That real GDP level Y2 is both equilibrium GDP and a balanced budget.

Question 15

What has been the main purpose of fiscal policy,as used by most governments,since WWII?

Accepted Answer

A) To achieve the goal of full employment. 
B) To achieve the goal of stable prices. 
C) To achieve the twin goals of full employment and a viable balance of payments. 
D) To achieve the twin goals of stable prices and a viable balance of payments. 
E) To achieve the twin goals of full employment and stable prices. 
A) To achieve the goal of full employment. 
B) To achieve the goal of stable prices. 
C) To achieve the twin goals of full employment and a viable balance of payments. 
D) To achieve the twin goals of stable prices and a viable balance of payments. 
E) To achieve the twin goals of full employment and stable prices.

Question 16

What is government spending on goods and services in excess of net tax revenue called?

Accepted Answer

A) Monetizing the debt. 
B) A budget deficit. 
C) A budget surplus. 
D) Pro-cyclical fiscal policy. 
A) Monetizing the debt. 
B) A budget deficit. 
C) A budget surplus. 
D) Pro-cyclical fiscal policy.

Question 17

A balanced-budget philosophy would be pro-cyclical in all the following cases except one.Which one is the exception?

Accepted Answer

A) A recessionary gap and a budget deficit. 
B) An inflationary gap and a budget deficit. 
C) An inflationary gap and a budget surplus. 
D) High unemployment and a budget deficit. 
A) A recessionary gap and a budget deficit. 
B) An inflationary gap and a budget deficit. 
C) An inflationary gap and a budget surplus. 
D) High unemployment and a budget deficit.

Question 18

What is the national debt?

Accepted Answer

A) The sum of the federal government's budget deficits less surpluses. 
B) The total amount borrowed domestically by all levels of government. 
C) The total amount borrowed domestically and internationally by all levels of government. 
D) The amount owed by the federal government to the World Bank. 
A) The sum of the federal government's budget deficits less surpluses. 
B) The total amount borrowed domestically by all levels of government. 
C) The total amount borrowed domestically and internationally by all levels of government. 
D) The amount owed by the federal government to the World Bank.

Question 19

"The level of real GDP does not change when the government decreases government spending and taxes by the same amount." Evaluate this statement.

Accepted Answer

This statement is incorrect.A policy of

Question 20

What is counter-cyclical fiscal policy?

Accepted Answer

A) Government taxation policy aimed at a balanced budget. 
B) Government spending and taxation policy aimed at a balanced budget. 
C) Deliberate adjustments in the level of government spending and taxation in order to close recessionary or inflationary gaps. 
D) Deliberate adjustments in the level of government spending and taxation in order to ensure equilibrium GDP. 
A) Government taxation policy aimed at a balanced budget. 
B) Government spending and taxation policy aimed at a balanced budget. 
C) Deliberate adjustments in the level of government spending and taxation in order to close recessionary or inflationary gaps. 
D) Deliberate adjustments in the level of government spending and taxation in order to ensure equilibrium GDP.

What are the problems associated with a cyclically balanced budget fiscal policy?

Which of the following is one of the reasons why the Canadian government went from budget deficits to budget surpluses in the late 1990s?

Assume the economy is experiencing an inflationary gap and the government has a budget surplus.Which of the following is a correct example of counter-cyclical fiscal policy with the corresponding effect on the budget?

What is the primary goal of a balanced budget fiscal policy? What is the major criticism of it?

Those who advocate counter-cyclical fiscal policy would agree with all but one of the following statements.Which is the exception?

Which of the following statements is an accurate comment on the payment of interest on the public debt?

Assume that the economy is at full employment. a)Explain the effect to the economy if there is a decrease in investment spending. b)Explain how countercyclical fiscal policy will adjust the economy back to full employment.

What is the primary goal of counter-cyclical fiscal policy? What are three criticisms of it?

What is a balanced budget?

All of the following,except one,are examples of automatic stabilizers.Which is the exception?

Assume that the economy is at full employment. a)Explain the effect to the economy if there is an increase in foreign income. b)Explain how countercyclical fiscal policy will adjust the economy back to full employment.

What is the effect of a decrease in both government spending and taxes by the same amount?

All of the following,except one,would result from expansionary fiscal policy.Which is the exception?

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

What has been the main purpose of fiscal policy,as used by most governments,since WWII?

What is government spending on goods and services in excess of net tax revenue called?

A balanced-budget philosophy would be pro-cyclical in all the following cases except one.Which one is the exception?

What is the national debt?

"The level of real GDP does not change when the government decreases government spending and taxes by the same amount." Evaluate this statement.

What is counter-cyclical fiscal policy?

The Economic Problem

Demand and Supply: an Introduction

Measuring the Economy 1: GDP and Economic Growth

Measuring the Economy 2: Unemployment and Inflation

Aggregate Demand and Supply

Aggregate Expenditures

Money and Banking

The Money Market and Monetary Policy

International Trade

Exchange Rates and the Balance of Payments

Macroeconomic Policy Revisited

A Walk Through the Twentieth Century and Beyond

Filters

Exam 7: Fiscal Policy

What are the problems associated with a cyclically balanced budget fiscal policy?

Which of the following is one of the reasons why the Canadian government went from budget deficits to budget surpluses in the late 1990s?

Assume the economy is experiencing an inflationary gap and the government has a budget surplus.Which of the following is a correct example of counter-cyclical fiscal policy with the corresponding effect on the budget?

What is the primary goal of a balanced budget fiscal policy? What is the major criticism of it?

Those who advocate counter-cyclical fiscal policy would agree with all but one of the following statements.Which is the exception?

Which of the following statements is an accurate comment on the payment of interest on the public debt?

Assume that the economy is at full employment. a)Explain the effect to the economy if there is a decrease in investment spending. b)Explain how countercyclical fiscal policy will adjust the economy back to full employment.

What is the primary goal of counter-cyclical fiscal policy? What are three criticisms of it?

What is a balanced budget?

All of the following,except one,are examples of automatic stabilizers.Which is the exception?

Assume that the economy is at full employment. a)Explain the effect to the economy if there is an increase in foreign income. b)Explain how countercyclical fiscal policy will adjust the economy back to full employment.

What is the effect of a decrease in both government spending and taxes by the same amount?

All of the following,except one,would result from expansionary fiscal policy.Which is the exception?

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

What has been the main purpose of fiscal policy,as used by most governments,since WWII?

What is government spending on goods and services in excess of net tax revenue called?

A balanced-budget philosophy would be pro-cyclical in all the following cases except one.Which one is the exception?

What is the national debt?

"The level of real GDP does not change when the government decreases government spending and taxes by the same amount." Evaluate this statement.

What is counter-cyclical fiscal policy?

The Economic Problem

Demand and Supply: an Introduction

Measuring the Economy 1: GDP and Economic Growth

Measuring the Economy 2: Unemployment and Inflation

Aggregate Demand and Supply

Aggregate Expenditures

Money and Banking

The Money Market and Monetary Policy

International Trade

Exchange Rates and the Balance of Payments

Macroeconomic Policy Revisited

A Walk Through the Twentieth Century and Beyond

Filters