Question 1

The size of the federal government debt is astounding! Comment relative to the national debt and the relative size of the Federal budget balance.

Accepted Answer

A proper discussion of the deficits of t

Question 2

Suppose the government increases lump-sum taxes.This causes

Accepted Answer

A) disposable income to decrease,which causes consumption spending to decrease and aggregate demand to decrease. 
B) government spending to decrease,which causes aggregate demand to decrease. 
C) consumption spending to decrease and spending on imports to increase.The effect on aggregate demand depends on whether domestic spending or spending on imports decreased the most. 
D) disposable income to decrease,which causes aggregate supply to decrease. 
A) disposable income to decrease,which causes consumption spending to decrease and aggregate demand to decrease. 
B) government spending to decrease,which causes aggregate demand to decrease. 
C) consumption spending to decrease and spending on imports to increase.The effect on aggregate demand depends on whether domestic spending or spending on imports decreased the most. 
D) disposable income to decrease,which causes aggregate supply to decrease.

Question 3

The tendency for expansionary fiscal policy to cause a reduction in planned investment spending by the private sector is called

Accepted Answer

A) the indirect effect. 
B) the interest rate effect. 
C) the crowding-out effect. 
D) the Laffer effect. 
A) the indirect effect. 
B) the interest rate effect. 
C) the crowding-out effect. 
D) the Laffer effect.

Question 4

Multiplier effects take time to work through the economy,which is known as the

Accepted Answer

A) action time lag. 
B) effect time lag. 
C) recognition time lag. 
D) Ricardian-equivalence time lag. 
A) action time lag. 
B) effect time lag. 
C) recognition time lag. 
D) Ricardian-equivalence time lag.

Question 5

If the government increases taxes,then the

Accepted Answer

A) short-run aggregate supply curve shifts to the right. 
B) long-run aggregate supply curve shifts to the left. 
C) aggregate demand curve shifts to the right. 
D) aggregate demand curve shifts to the left. 
A) short-run aggregate supply curve shifts to the right. 
B) long-run aggregate supply curve shifts to the left. 
C) aggregate demand curve shifts to the right. 
D) aggregate demand curve shifts to the left.

Question 6

The effect time lag of fiscal policy refers to

Accepted Answer

A) the time needed for Parliament to enact a policy. 
B) the delay in recognizing an economic problem. 
C) the time that elapses between the onset of a policy and the results of that policy on the economy. 
D) the difficulty in getting the Prime Minister and Parliament to agree on an appropriate policy. 
A) the time needed for Parliament to enact a policy. 
B) the delay in recognizing an economic problem. 
C) the time that elapses between the onset of a policy and the results of that policy on the economy. 
D) the difficulty in getting the Prime Minister and Parliament to agree on an appropriate policy.

Question 7

According to the new classical economists,increases in government spending unaccompanied by tax increases will not necessarily increase aggregate demand because

Accepted Answer

A) consumers will consume less and save more to prepare for increased taxes in the future. 
B) the private sector is more likely than the public sector to spend any extra income on national defense. 
C) consumers will increase their consumption proportionately more than Keynesian economists believe they will. 
D) consumers will save less than they otherwise would have. 
A) consumers will consume less and save more to prepare for increased taxes in the future. 
B) the private sector is more likely than the public sector to spend any extra income on national defense. 
C) consumers will increase their consumption proportionately more than Keynesian economists believe they will. 
D) consumers will save less than they otherwise would have.

Question 8

What are automatic stabilizers? How do they help stabilize economic activity?

Accepted Answer

Automatic stabilizers are features of fi

Question 9

If the government wants to engage in fiscal policy to close a recessionary gap,it should

Accepted Answer

A) increase government spending in order to increase aggregate supply. 
B) decrease government spending in order to increase aggregate supply. 
C) increase government spending in order to increase aggregate demand. 
D) decrease government spending in order to decrease aggregate demand. 
A) increase government spending in order to increase aggregate supply. 
B) decrease government spending in order to increase aggregate supply. 
C) increase government spending in order to increase aggregate demand. 
D) decrease government spending in order to decrease aggregate demand.

Question 10

Suppose the government increased marginal tax rates from 30 percent to 50 percent.This would be an example of

Accepted Answer

A) crowding out. 
B) demand-side economics. 
C) an expansionary fiscal policy. 
D) a contractionary fiscal policy. 
A) crowding out. 
B) demand-side economics. 
C) an expansionary fiscal policy. 
D) a contractionary fiscal policy.

Question 11

Suppose the government lowered marginal tax rates from 50 percent to 30 percent.This would be an example of

Accepted Answer

A) crowding out. 
B) demand-side economics. 
C) an expansionary fiscal policy. 
D) a contractionary fiscal policy. 
A) crowding out. 
B) demand-side economics. 
C) an expansionary fiscal policy. 
D) a contractionary fiscal policy.

Question 12

Expansionary fiscal policy falls short of its goal.Some economists claim it is due to indirect crowding out.What evidence is consistent with this claim?

Accepted Answer

A) A reduction in consumer spending 
B) The interest rate increased 
C) Saving increased 
D) The price level increased 
A) A reduction in consumer spending 
B) The interest rate increased 
C) Saving increased 
D) The price level increased

Question 13

If the government increases government spending,then the

Accepted Answer

A) short-run aggregate supply curve shifts to the right. 
B) long-run aggregate supply curve shifts to the left. 
C) aggregate demand curve shifts to the right. 
D) aggregate demand curve shifts to the left. 
A) short-run aggregate supply curve shifts to the right. 
B) long-run aggregate supply curve shifts to the left. 
C) aggregate demand curve shifts to the right. 
D) aggregate demand curve shifts to the left.

Question 14

Figure 11-2  
-Assume the economy was at E in Figure 11-2 and the government increased spending.If the aggregate demand curve initially shifted to A D₂,but then fell back to AD₃,then we know that

Accepted Answer

A) the multiplier is larger than the government thought. 
B) the economy will experience an expansionary gap. 
C) some planned private investment spending has been crowded out. 
D) planned private investment spending unexpectedly increased. 
A) the multiplier is larger than the government thought. 
B) the economy will experience an expansionary gap. 
C) some planned private investment spending has been crowded out. 
D) planned private investment spending unexpectedly increased.

Question 15

To shift the aggregate demand curve inward and thereby reduce an expansionary gap,the government could

Accepted Answer

A) increase taxes. 
B) increase government spending. 
C) decrease government spending. 
D) increase Social Security benefits. 
A) increase taxes. 
B) increase government spending. 
C) decrease government spending. 
D) increase Social Security benefits.

Question 16

List and describe in detail the 5 possible offsets to fiscal policy.

Accepted Answer

1.Crowding out.
2.The net export effect.

Question 17

The implementation of government policy is generally considered to be subject to time lags.If the government were considering adopting a new law in harmony with NAFTA that would create one currency between Canada,the United States,and Mexico (similar to that of the Euro),describe each of the time lags in detail in deference to this policy action.

Accepted Answer

1.Recognition time lag - time to notice

Question 18

Which of the following statements about fiscal policy is TRUE?

Accepted Answer

A) Real GDP can be increased above its long-run equilibrium only in the short run. 
B) Real GDP can never be increased above its long-run equilibrium,even for a brief period of time. 
C) Government can shift the aggregate demand curve inward by increasing spending. 
D) Government can shift the aggregate demand curve outward by reducing spending. 
A) Real GDP can be increased above its long-run equilibrium only in the short run. 
B) Real GDP can never be increased above its long-run equilibrium,even for a brief period of time. 
C) Government can shift the aggregate demand curve inward by increasing spending. 
D) Government can shift the aggregate demand curve outward by reducing spending.

Question 19

Supply side economics refers to

Accepted Answer

A) attempts at increasing aggregate demand to coincide with the long-run aggregate supply. 
B) attempts at creating incentives that will generate increased productivity and output. 
C) selecting fiscal policy so that the revenues of the federal government are maximized. 
D) all attempts at increasing government spending and narrowing the budget deficit. 
A) attempts at increasing aggregate demand to coincide with the long-run aggregate supply. 
B) attempts at creating incentives that will generate increased productivity and output. 
C) selecting fiscal policy so that the revenues of the federal government are maximized. 
D) all attempts at increasing government spending and narrowing the budget deficit.

Question 20

According to supply-side economists,lower marginal tax rates will not necessarily lead to lower tax revenues because

Accepted Answer

A) the crowding out effect does not apply to taxes. 
B) an increase in tax rates increases the opportunity cost of labour. 
C) the aggregate supply curve will shift inward to the left if the tax rates are lowered. 
D) the lower marginal tax rates will be applied to a growing tax base due to economic growth. 
A) the crowding out effect does not apply to taxes. 
B) an increase in tax rates increases the opportunity cost of labour. 
C) the aggregate supply curve will shift inward to the left if the tax rates are lowered. 
D) the lower marginal tax rates will be applied to a growing tax base due to economic growth.

The size of the federal government debt is astounding! Comment relative to the national debt and the relative size of the Federal budget balance.

Suppose the government increases lump-sum taxes.This causes

The tendency for expansionary fiscal policy to cause a reduction in planned investment spending by the private sector is called

Multiplier effects take time to work through the economy,which is known as the

If the government increases taxes,then the

The effect time lag of fiscal policy refers to

According to the new classical economists,increases in government spending unaccompanied by tax increases will not necessarily increase aggregate demand because

What are automatic stabilizers? How do they help stabilize economic activity?

If the government wants to engage in fiscal policy to close a recessionary gap,it should

Suppose the government increased marginal tax rates from 30 percent to 50 percent.This would be an example of

Suppose the government lowered marginal tax rates from 50 percent to 30 percent.This would be an example of

Expansionary fiscal policy falls short of its goal.Some economists claim it is due to indirect crowding out.What evidence is consistent with this claim?

If the government increases government spending,then the

Figure 11-2 -Assume the economy was at E in Figure 11-2 and the government increased spending.If the aggregate demand curve initially shifted to A D₂,but then fell back to AD₃,then we know that

To shift the aggregate demand curve inward and thereby reduce an expansionary gap,the government could

List and describe in detail the 5 possible offsets to fiscal policy.

Which of the following statements about fiscal policy is TRUE?

Supply side economics refers to

According to supply-side economists,lower marginal tax rates will not necessarily lead to lower tax revenues because

The Nature of Economics

Production Possibilities and Economic Systems

Demand and Supply

Introduction to Macroeconomics

Measuring the Economys Performance

Modelling Real Gdp and the Price Level in the Long Run

Economic Growth and Development

Modelling Real Gdp and the Price Level in the Short Run

Consumption, investment, and the Multiplier

The Public Sector

Money and the Banking System

Money Creation and Deposit Insurance

The Bank of Canada and Monetary Policy

Issues in Stabilization Policy

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Exam 11: Fiscal Policy and the Public Debt

The size of the federal government debt is astounding! Comment relative to the national debt and the relative size of the Federal budget balance.

Suppose the government increases lump-sum taxes.This causes

The tendency for expansionary fiscal policy to cause a reduction in planned investment spending by the private sector is called

Multiplier effects take time to work through the economy,which is known as the

If the government increases taxes,then the

The effect time lag of fiscal policy refers to

According to the new classical economists,increases in government spending unaccompanied by tax increases will not necessarily increase aggregate demand because

What are automatic stabilizers? How do they help stabilize economic activity?

If the government wants to engage in fiscal policy to close a recessionary gap,it should

Suppose the government increased marginal tax rates from 30 percent to 50 percent.This would be an example of

Suppose the government lowered marginal tax rates from 50 percent to 30 percent.This would be an example of

Expansionary fiscal policy falls short of its goal.Some economists claim it is due to indirect crowding out.What evidence is consistent with this claim?

If the government increases government spending,then the

Figure 11-2 -Assume the economy was at E in Figure 11-2 and the government increased spending.If the aggregate demand curve initially shifted to A D₂,but then fell back to AD₃,then we know that

To shift the aggregate demand curve inward and thereby reduce an expansionary gap,the government could

List and describe in detail the 5 possible offsets to fiscal policy.

Which of the following statements about fiscal policy is TRUE?

Supply side economics refers to

According to supply-side economists,lower marginal tax rates will not necessarily lead to lower tax revenues because

The Nature of Economics

Production Possibilities and Economic Systems

Demand and Supply

Introduction to Macroeconomics

Measuring the Economys Performance

Modelling Real Gdp and the Price Level in the Long Run

Economic Growth and Development

Modelling Real Gdp and the Price Level in the Short Run

Consumption, investment, and the Multiplier

The Public Sector

Money and the Banking System

Money Creation and Deposit Insurance

The Bank of Canada and Monetary Policy

Issues in Stabilization Policy

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters