Question 1

In 2012, which of the following countries had the highest debt relative to GDP for major economies?

Accepted Answer

A)  Canada 
B)  the United States 
C)  Japan 
D)  Germany 
A)  Canada 
B)  the United States 
C)  Japan 
D)  Germany C

Question 2

Assume autonomous net taxes fall by $300, and the MPC equals 2/3.Net exports, planned investment, taxes, and government purchases are autonomous and remain fixed.As a result, what will be the change in equilibrium real GDP demanded?

Accepted Answer

A)  It will fall by $300. 
B)  It will rise by $300. 
C)  It will fall by $600. 
D)  It will rise by $600. 
A)  It will fall by $300. 
B)  It will rise by $300. 
C)  It will fall by $600. 
D)  It will rise by $600. D

Question 3

Given the desire of politicians to get re-elected, what economic tool might they try to use in the short run?

Accepted Answer

A)  monetary policy 
B)  fiscal policy 
C)  tax increases 
D)  increases in the price level 
A)  monetary policy 
B)  fiscal policy 
C)  tax increases 
D)  increases in the price level B

Question 4

Exhibit 11-4
  
-Refer to the graph in the exhibit.Which one of the following sets of policies would move the economy to full employment?

Accepted Answer

A)  increase government purchases, increase taxes, and decrease transfer payments 
B)  decrease government purchases, increase taxes, and decrease transfer payments 
C)  increase government purchases, decrease taxes, and increase transfer payments 
D)  increase government purchases, increase in taxes, and increase transfer payments 
A)  increase government purchases, increase taxes, and decrease transfer payments 
B)  decrease government purchases, increase taxes, and decrease transfer payments 
C)  increase government purchases, decrease taxes, and increase transfer payments 
D)  increase government purchases, increase in taxes, and increase transfer payments

Question 5

Which of the following assumptions is usually made about government purchases?

Accepted Answer

A)  Government purchases vary directly with the interest rate. 
B)  Government purchases are autonomous. 
C)  Government purchases vary directly with the level of income. 
D)  Government purchases vary inversely with the level of income. 
A)  Government purchases vary directly with the interest rate. 
B)  Government purchases are autonomous. 
C)  Government purchases vary directly with the level of income. 
D)  Government purchases vary inversely with the level of income.

Question 6

Suppose autonomous net taxes equal $1 trillion at all levels of real GDP.What can be safely assumed about net taxes?

Accepted Answer

A)  They are autonomous. 
B)  They are equal to transfer payments. 
C)  They depend on the level of real GDP. 
D)  They equal zero when GDP equals zero. 
A)  They are autonomous. 
B)  They are equal to transfer payments. 
C)  They depend on the level of real GDP. 
D)  They equal zero when GDP equals zero.

Question 7

What are most government transfer programs known as?

Accepted Answer

A)  as discretionary stabilizers 
B)  as contractionary stabilizers 
C)  as automatic stabilizers 
D)  as expansionary stabilizers 
A)  as discretionary stabilizers 
B)  as contractionary stabilizers 
C)  as automatic stabilizers 
D)  as expansionary stabilizers

Question 8

What was the amount of federal government outlays as a percentage of GDP in 2012 in Canada?

Accepted Answer

A)  approximately 10 percent 
B)  approximately 20 percent 
C)  approximately 30 percent 
D)  approximately 40 percent 
A)  approximately 10 percent 
B)  approximately 20 percent 
C)  approximately 30 percent 
D)  approximately 40 percent

Question 9

What is the effect of automatic stabilizers on the business cycle?

Accepted Answer

A)  to make upswings larger and downswings smaller 
B)  to make upswings smaller and downswings larger 
C)  to make upswings smaller and downswings smaller 
D)  to make upswings larger and downswings larger 
A)  to make upswings larger and downswings smaller 
B)  to make upswings smaller and downswings larger 
C)  to make upswings smaller and downswings smaller 
D)  to make upswings larger and downswings larger

Question 10

Which of the following had the most effect in pulling the Canadian economy out of the Great Depression?

Accepted Answer

A)  the economy's natural tendency to contract toward potential output 
B)  the federal government's aggressive policy of tax cuts 
C)  the federal government's aggressive policy of monetary stimulus 
D)  the increased spending brought on by World War II 
A)  the economy's natural tendency to contract toward potential output 
B)  the federal government's aggressive policy of tax cuts 
C)  the federal government's aggressive policy of monetary stimulus 
D)  the increased spending brought on by World War II

Question 11

What set of fiscal policies could the government use to close an expansionary gap?

Accepted Answer

A)  decrease taxes, increase government purchases, and increase transfer payments 
B)  increase taxes, increase government purchases, and increase transfer payments 
C)  increase taxes, increase transfer payments, and decrease government purchases 
D)  increase taxes, decrease transfer payments, and decrease government purchases 
A)  decrease taxes, increase government purchases, and increase transfer payments 
B)  increase taxes, increase government purchases, and increase transfer payments 
C)  increase taxes, increase transfer payments, and decrease government purchases 
D)  increase taxes, decrease transfer payments, and decrease government purchases

Question 12

The Canadian federal income tax is progressive.What does this mean?

Accepted Answer

A)  Tax receipts grow at the same rate that income grows. 
B)  Tax receipts grow at the same rate that government spending grows. 
C)  High-income individuals are generally able to pay fewer taxes. 
D)  High-income individuals are taxed at a higher rate than low-income individuals. 
A)  Tax receipts grow at the same rate that income grows. 
B)  Tax receipts grow at the same rate that government spending grows. 
C)  High-income individuals are generally able to pay fewer taxes. 
D)  High-income individuals are taxed at a higher rate than low-income individuals.

Question 13

What is fiscal policy concerned with?

Accepted Answer

A)  only government spending and taxation 
B)  only government spending and money 
C)  only money and taxation 
D)  government spending, taxation, and money 
A)  only government spending and taxation 
B)  only government spending and money 
C)  only money and taxation 
D)  government spending, taxation, and money

Question 14

Suppose the net taxes on the quantity of real GDP demanded changes.How would this change be expressed?

Accepted Answer

A)  as a shift in the consumption function times the marginal propensity to consume 
B)  as a shift in the consumption function times the marginal propensity to save 
C)  as a shift in the consumption function times the autonomous net tax multiplier 
D)  as a shift in the consumption function times the simple spending multiplier 
A)  as a shift in the consumption function times the marginal propensity to consume 
B)  as a shift in the consumption function times the marginal propensity to save 
C)  as a shift in the consumption function times the autonomous net tax multiplier 
D)  as a shift in the consumption function times the simple spending multiplier

Question 15

Suppose autonomous net taxes increase by $200 billion and the MPC equals 0.75.By what amount will equilibrium income decrease?

Accepted Answer

A)  by $150 billion 
B)  by $200 billion 
C)  by $267 billion 
D)  by $600 billion 
A)  by $150 billion 
B)  by $200 billion 
C)  by $267 billion 
D)  by $600 billion

Question 16

What tools are used in fiscal policy?

Accepted Answer

A)  increases in the money supply 
B)  nationalization of key industries 
C)  only government purchases 
D)  government purchases, transfer payments, and taxes 
A)  increases in the money supply 
B)  nationalization of key industries 
C)  only government purchases 
D)  government purchases, transfer payments, and taxes

Question 17

How are transfer payments, such as welfare benefits, affected during economic contractions?

Accepted Answer

A)  Transfer payments automatically increase, reducing incomes further. 
B)  Transfer payments automatically increase, thus reducing the impact of the contraction on disposable income. 
C)  Transfer payments automatically decrease, because tax revenues fall and welfare benefits are no longer affordable. 
D)  Transfer payments automatically decrease, as a discretionary move on the part of Parliament to stimulate expansion. 
A)  Transfer payments automatically increase, reducing incomes further. 
B)  Transfer payments automatically increase, thus reducing the impact of the contraction on disposable income. 
C)  Transfer payments automatically decrease, because tax revenues fall and welfare benefits are no longer affordable. 
D)  Transfer payments automatically decrease, as a discretionary move on the part of Parliament to stimulate expansion.

Question 18

Exhibit 11-3
  
-Refer to the graph in the exhibit.Consider an economy characterized by the aggregate demand curve AD and the short-run aggregate supply curve SRAS50.What is the short-run equilibrium level of real GDP and the price level?

Accepted Answer

A)  $300 and 20 
B)  $500 and 20 
C)  $300 and 40 
D)  $500 and 50 
A)  $300 and 20 
B)  $500 and 20 
C)  $300 and 40 
D)  $500 and 50

Question 19

Suppose that the economy has an expansionary gap of $1,000 and the MPC equals 0.8.With an upward-sloping short-run aggregate supply curve, by what amount will the government increase autonomous net taxes in order to close the gap?

Accepted Answer

A)  by $0 
B)  by $80 
C)  by $250 
D)  by $1,000 
A)  by $0 
B)  by $80 
C)  by $250 
D)  by $1,000

Question 20

Suppose autonomous net taxes decline by $40 billion and the MPC equals 0.75.What effect will this have on equilibrium real GDP demanded?

Accepted Answer

A)  It will decline by $120 billion. 
B)  It will increase by $120 billion. 
C)  It will decline by $160 billion. 
D)  It will increase by $160 billion. 
A)  It will decline by $120 billion. 
B)  It will increase by $120 billion. 
C)  It will decline by $160 billion. 
D)  It will increase by $160 billion.

In 2012, which of the following countries had the highest debt relative to GDP for major economies?

Assume autonomous net taxes fall by $300, and the MPC equals 2/3.Net exports, planned investment, taxes, and government purchases are autonomous and remain fixed.As a result, what will be the change in equilibrium real GDP demanded?

Given the desire of politicians to get re-elected, what economic tool might they try to use in the short run?

Exhibit 11-4 -Refer to the graph in the exhibit.Which one of the following sets of policies would move the economy to full employment?

Which of the following assumptions is usually made about government purchases?

Suppose autonomous net taxes equal $1 trillion at all levels of real GDP.What can be safely assumed about net taxes?

What are most government transfer programs known as?

What was the amount of federal government outlays as a percentage of GDP in 2012 in Canada?

What is the effect of automatic stabilizers on the business cycle?

Which of the following had the most effect in pulling the Canadian economy out of the Great Depression?

What set of fiscal policies could the government use to close an expansionary gap?

The Canadian federal income tax is progressive.What does this mean?

What is fiscal policy concerned with?

Suppose the net taxes on the quantity of real GDP demanded changes.How would this change be expressed?

Suppose autonomous net taxes increase by $200 billion and the MPC equals 0.75.By what amount will equilibrium income decrease?

What tools are used in fiscal policy?

How are transfer payments, such as welfare benefits, affected during economic contractions?

Exhibit 11-3 -Refer to the graph in the exhibit.Consider an economy characterized by the aggregate demand curve AD and the short-run aggregate supply curve SRAS50.What is the short-run equilibrium level of real GDP and the price level?

Suppose that the economy has an expansionary gap of $1,000 and the MPC equals 0.8.With an upward-sloping short-run aggregate supply curve, by what amount will the government increase autonomous net taxes in order to close the gap?

Suppose autonomous net taxes decline by $40 billion and the MPC equals 0.75.What effect will this have on equilibrium real GDP demanded?

The Art and Science of Economic Analysis

Economic Tools and Economic Systems

Economic Decision Makers

Demand, Supply, and Markets

Algebraic Approach to Demand, Supply, and Equilibrium

Introduction to Macroeconomics

Tracking the Canadian Economy

Unemployment and Inflation

Productivity and Growth

Aggregate Expenditure and Aggregate Demand

Aggregate Supply

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy in an Open Economy

Macro Policy Debate: Active or Passive

International Finance

International Trade

Economic Development

Understanding Graphs

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Exam 12: Fiscal Policy

In 2012, which of the following countries had the highest debt relative to GDP for major economies?

Assume autonomous net taxes fall by $300, and the MPC equals 2/3.Net exports, planned investment, taxes, and government purchases are autonomous and remain fixed.As a result, what will be the change in equilibrium real GDP demanded?

Given the desire of politicians to get re-elected, what economic tool might they try to use in the short run?

Exhibit 11-4 -Refer to the graph in the exhibit.Which one of the following sets of policies would move the economy to full employment?

Which of the following assumptions is usually made about government purchases?

Suppose autonomous net taxes equal $1 trillion at all levels of real GDP.What can be safely assumed about net taxes?

What are most government transfer programs known as?

What was the amount of federal government outlays as a percentage of GDP in 2012 in Canada?

What is the effect of automatic stabilizers on the business cycle?

Which of the following had the most effect in pulling the Canadian economy out of the Great Depression?

What set of fiscal policies could the government use to close an expansionary gap?

The Canadian federal income tax is progressive.What does this mean?

What is fiscal policy concerned with?

Suppose the net taxes on the quantity of real GDP demanded changes.How would this change be expressed?

Suppose autonomous net taxes increase by $200 billion and the MPC equals 0.75.By what amount will equilibrium income decrease?

What tools are used in fiscal policy?

How are transfer payments, such as welfare benefits, affected during economic contractions?

Exhibit 11-3 -Refer to the graph in the exhibit.Consider an economy characterized by the aggregate demand curve AD and the short-run aggregate supply curve SRAS50.What is the short-run equilibrium level of real GDP and the price level?

Suppose that the economy has an expansionary gap of $1,000 and the MPC equals 0.8.With an upward-sloping short-run aggregate supply curve, by what amount will the government increase autonomous net taxes in order to close the gap?

Suppose autonomous net taxes decline by $40 billion and the MPC equals 0.75.What effect will this have on equilibrium real GDP demanded?

The Art and Science of Economic Analysis

Economic Tools and Economic Systems

Economic Decision Makers

Demand, Supply, and Markets

Algebraic Approach to Demand, Supply, and Equilibrium

Introduction to Macroeconomics

Tracking the Canadian Economy

Unemployment and Inflation

Productivity and Growth

Aggregate Expenditure and Aggregate Demand

Aggregate Supply

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy in an Open Economy

Macro Policy Debate: Active or Passive

International Finance

International Trade

Economic Development

Understanding Graphs

Filters