Question 1

To close a recessionary gap through fiscal policy,the government should

Accepted Answer

A) decrease government spending in order to increase aggregate supply. 
B) increase government spending in order to increase aggregate demand. 
C) reduce taxes in order to stimulate investment,and thus increase aggregate supply. 
D) increase government spending and taxes in order to both increase aggregate demand and aggregate supply. 
A) decrease government spending in order to increase aggregate supply. 
B) increase government spending in order to increase aggregate demand. 
C) reduce taxes in order to stimulate investment,and thus increase aggregate supply. 
D) increase government spending and taxes in order to both increase aggregate demand and aggregate supply.

Question 2

If the government wants to decrease real GDP levels,it could

Accepted Answer

A) increase government expenditures. 
B) increase taxes. 
C) wait for inflationary pressure to come. 
D) decrease government expenditures and increase taxes. 
A) increase government expenditures. 
B) increase taxes. 
C) wait for inflationary pressure to come. 
D) decrease government expenditures and increase taxes.

Question 3

To reduce an expansionary gap,the government could

Accepted Answer

A) decrease taxes. 
B) increase taxes. 
C) increase spending on goods and services. 
D) increase military spending. 
A) decrease taxes. 
B) increase taxes. 
C) increase spending on goods and services. 
D) increase military spending.

Question 4

If the government decreases 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 5

Expansionary fiscal policy is designed to

Accepted Answer

A) increase real national income and increase the price level. 
B) reduce real national income and reduce the price level. 
C) raise both real national income and the price level. 
D) raise the price level only. 
A) increase real national income and increase the price level. 
B) reduce real national income and reduce the price level. 
C) raise both real national income and the price level. 
D) raise the price level only.

Question 6

Suppose the economy is at a short run equilibrium in recession.Which of the following fiscal policies would increase output and prices in the short run?

Accepted Answer

A) a decrease in government spending 
B) a reduction in taxes 
C) an increase in taxes 
D) an increase in interest rates 
A) a decrease in government spending 
B) a reduction in taxes 
C) an increase in taxes 
D) an increase in interest rates

Question 7

We know that discretionary fiscal policy

Accepted Answer

A) is never effective. 
B) is always effective. 
C) is most effective during normal times. 
D) is most effective during abnormal times. 
A) is never effective. 
B) is always effective. 
C) is most effective during normal times. 
D) is most effective during abnormal times.

Question 8

If increased government spending has no effect on either the level of real national income or the price level,we know that

Accepted Answer

A) the economy was already at full employment. 
B) the crowding out of private sector investment spending and consumption spending was complete. 
C) the interest rate effect was small. 
D) the government spending was on goods and services the people didn't value. 
A) the economy was already at full employment. 
B) the crowding out of private sector investment spending and consumption spending was complete. 
C) the interest rate effect was small. 
D) the government spending was on goods and services the people didn't value.

Question 9

The time that is required to collect information about the current state of the economy is known as the

Accepted Answer

A) recognition time lag. 
B) action time lag. 
C) effect time lag. 
D) fiscal lag. 
A) recognition time lag. 
B) action time lag. 
C) effect time lag. 
D) fiscal lag.

Question 10

According to traditional Keynesian analysis,fiscal policy operates by

Accepted Answer

A) informing consumers and business people about its plans for the economy so they will know how to adjust their behaviour. 
B) indirectly affecting aggregate demand through its effect on interest rates. 
C) directly affecting aggregate demand. 
D) directly affecting aggregate supply. 
A) informing consumers and business people about its plans for the economy so they will know how to adjust their behaviour. 
B) indirectly affecting aggregate demand through its effect on interest rates. 
C) directly affecting aggregate demand. 
D) directly affecting aggregate supply.

Question 11

If the government wants to increase real GDP levels,it could

Accepted Answer

A) decrease government expenditures. 
B) decrease taxes. 
C) decrease government expenditures and increase taxes. 
A) decrease government expenditures. 
B) decrease taxes. 
C) decrease government expenditures and increase taxes.

Question 12

Suppose the economy is at a short run equilibrium in recession.Which of the following fiscal policies would decrease output and prices in the short run?

Accepted Answer

A) an increase in government spending 
B) a reduction in taxes 
C) an increase in taxes 
D) an increase in interest rates 
A) an increase in government spending 
B) a reduction in taxes 
C) an increase in taxes 
D) an increase in interest rates

Question 13

The Ricardian equivalence theorem states that

Accepted Answer

A) an increase in government spending has no effect on aggregate supply. 
B) increases in government spending have a larger impact on real national income than decreases in taxes. 
C) an increase in the government budget deficit created by a current tax cut has no effect on aggregate demand. 
D) an increase in the government budget deficit has no effect on real national income because it only affects the price index. 
A) an increase in government spending has no effect on aggregate supply. 
B) increases in government spending have a larger impact on real national income than decreases in taxes. 
C) an increase in the government budget deficit created by a current tax cut has no effect on aggregate demand. 
D) an increase in the government budget deficit has no effect on real national income because it only affects the price index.

Question 14

Fiscal policy refers to the

Accepted Answer

A) manipulation of the money supply so as to increase the amount of paper currency in circulation. 
B) adjustment of government spending and taxes in order to achieve certain national economic goals. 
C) adjustment of national income data for price level changes. 
D) adjustment of the manner in which unemployment data is calculated so as to make it appear that unemployment is lower than it actually is. 
A) manipulation of the money supply so as to increase the amount of paper currency in circulation. 
B) adjustment of government spending and taxes in order to achieve certain national economic goals. 
C) adjustment of national income data for price level changes. 
D) adjustment of the manner in which unemployment data is calculated so as to make it appear that unemployment is lower than it actually is.

Question 15

The net export effect occurs when

Accepted Answer

A) increased government spending is used to buy goods made in foreign countries. 
B) Canadians invest overseas because they believe the government is spending and taxing too much. 
C) increased borrowing by the government due to expansionary fiscal policy generates a change in the exchange rate that causes net exports to fall. 
D) expansionary fiscal policy induces people to migrate to other countries. 
A) increased government spending is used to buy goods made in foreign countries. 
B) Canadians invest overseas because they believe the government is spending and taxing too much. 
C) increased borrowing by the government due to expansionary fiscal policy generates a change in the exchange rate that causes net exports to fall. 
D) expansionary fiscal policy induces people to migrate to other countries.

Question 16

When national income falls,which of the following will automatically occur?

Accepted Answer

A) a decrease in tax rates 
B) a decrease in tax revenues 
C) a decrease in unemployment compensation expenditures 
D) an increase in tax revenues 
A) a decrease in tax rates 
B) a decrease in tax revenues 
C) a decrease in unemployment compensation expenditures 
D) an increase in tax revenues

To close a recessionary gap through fiscal policy,the government should

If the government wants to decrease real GDP levels,it could

To reduce an expansionary gap,the government could

If the government decreases government spending,then the

Expansionary fiscal policy is designed to

Suppose the economy is at a short run equilibrium in recession.Which of the following fiscal policies would increase output and prices in the short run?

We know that discretionary fiscal policy

If increased government spending has no effect on either the level of real national income or the price level,we know that

The time that is required to collect information about the current state of the economy is known as the

According to traditional Keynesian analysis,fiscal policy operates by

If the government wants to increase real GDP levels,it could

Suppose the economy is at a short run equilibrium in recession.Which of the following fiscal policies would decrease output and prices in the short run?

The Ricardian equivalence theorem states that

Fiscal policy refers to the

The net export effect occurs when

When national income falls,which of the following will automatically occur?

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

To close a recessionary gap through fiscal policy,the government should

If the government wants to decrease real GDP levels,it could

To reduce an expansionary gap,the government could

If the government decreases government spending,then the

Expansionary fiscal policy is designed to

Suppose the economy is at a short run equilibrium in recession.Which of the following fiscal policies would increase output and prices in the short run?

We know that discretionary fiscal policy

If increased government spending has no effect on either the level of real national income or the price level,we know that

The time that is required to collect information about the current state of the economy is known as the

According to traditional Keynesian analysis,fiscal policy operates by

If the government wants to increase real GDP levels,it could

Suppose the economy is at a short run equilibrium in recession.Which of the following fiscal policies would decrease output and prices in the short run?

The Ricardian equivalence theorem states that

Fiscal policy refers to the

The net export effect occurs when

When national income falls,which of the following will automatically occur?

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