Question 1

How does a change in taxes primarily affect aggregate demand?

Accepted Answer

A) a tax change alters disposable income and consumption spending 
B) a tax change alters exports and net exports 
C) a tax change alters investment by an equal and opposite amount 
D) a tax change alters government purchases by an equal amount 
A) a tax change alters disposable income and consumption spending 
B) a tax change alters exports and net exports 
C) a tax change alters investment by an equal and opposite amount 
D) a tax change alters government purchases by an equal amount A

Question 2

What type of expenditures comprises the largest component of provincial and local government budgets?

Accepted Answer

A) health care 
B) education 
C) interest on outstanding debt 
D) social services 
A) health care 
B) education 
C) interest on outstanding debt 
D) social services A

Question 3

A tax cut has a greater effect on AD than an equivalent increase in government spending.

Accepted Answer

A) True 
 B)False  False

Question 4

The issuance of debt involves some intergenerational transfer of income; long after the debt is issued,a new generation of taxpayers must make interest payments on the debt.

Accepted Answer

A) True 
 B)False

Question 5

If MPC is 0.8,what size effect would a $200 billion increase in government purchases have on the "first round" of induced added consumption?

Accepted Answer

A) $80 billion 
B) $160 billion 
C) $200 billion 
D) $800 billion 
A) $80 billion 
B) $160 billion 
C) $200 billion 
D) $800 billion

Question 6

What type of tax is the current Canadian income tax an example of?

Accepted Answer

A) a regressive tax 
B) a negative tax 
C) a positive tax 
D) a progressive tax 
A) a regressive tax 
B) a negative tax 
C) a positive tax 
D) a progressive tax

Question 7

If the government wanted to move the economy out of a current recession,which of the following might be an appropriate policy action?

Accepted Answer

A) decreasing government purchases of goods and services 
B) increasing transfer payments 
C) increasing taxes 
D) decreasing government debt 
A) decreasing government purchases of goods and services 
B) increasing transfer payments 
C) increasing taxes 
D) decreasing government debt

Question 8

Which of the following is an example of a progressive tax?

Accepted Answer

A) a local property tax 
B) a provincial sales tax 
C) the federal income tax 
D) a tax on alcohol 
A) a local property tax 
B) a provincial sales tax 
C) the federal income tax 
D) a tax on alcohol

Question 9

What will an increase in government purchases or a decrease in taxes,other things being equal,tend to do?

Accepted Answer

A) decrease interest rates and decrease net exports 
B) increase interest rates and decrease net exports 
C) increase interest rates and increase net exports 
D) decrease interest rates and increase net exports 
A) decrease interest rates and decrease net exports 
B) increase interest rates and decrease net exports 
C) increase interest rates and increase net exports 
D) decrease interest rates and increase net exports

Question 10

Once Statistics Canada identifies an economic downturn,the Department of Finance must formulate a new budget and the politicians must approve it in Parliament.What is the term for the time it takes for this to occur?

Accepted Answer

A) implementation lag 
B) identification lag 
C) political lag 
D) impact lag 
A) implementation lag 
B) identification lag 
C) political lag 
D) impact lag

Question 11

Figure 10-2
  
-Refer to Figure 10-2.If the economy is currently at full-employment equilibrium and there is an increase in the value of the Canadian dollar,what will the short-run equilibrium be?

Accepted Answer

A) E3 
B) E2 
C) E1 
D) E0 
A) E3 
B) E2 
C) E1 
D) E0

Question 12

If the MPC is 2/3,2/3 of the effect of an increase in government purchases on aggregate demand will come from increased consumption.

Accepted Answer

A) True 
 B)False

Question 13

If government increases its purchases by $20 billion and the MPC is 0.9,what will the resulting increase in the consumption component of AD be?

Accepted Answer

A) $2 billion 
B) $18 billion 
C) $180 billion 
D) $200 billion 
A) $2 billion 
B) $18 billion 
C) $180 billion 
D) $200 billion

Question 14

Due to crowding-out effects,other things being equal,in what direction will net exports and investment tend to move in relation to a change in transfer payments?

Accepted Answer

A) Net exports will tend to move in the opposite direction from a change in transfer payments, and investment will tend to move in the same direction. 
B) Net exports and investment will tend to move in the same direction as a change in transfer payments. 
C) Net exports and investment will tend to move in the opposite direction from a change in transfer payments. 
D) Net exports will tend to move in the same direction as a change in transfer payments, and investment will tend to move in the opposite direction. 
A) Net exports will tend to move in the opposite direction from a change in transfer payments, and investment will tend to move in the same direction. 
B) Net exports and investment will tend to move in the same direction as a change in transfer payments. 
C) Net exports and investment will tend to move in the opposite direction from a change in transfer payments. 
D) Net exports will tend to move in the same direction as a change in transfer payments, and investment will tend to move in the opposite direction.

Question 15

If government purchases exceed tax revenue,there is a budget deficit.

Accepted Answer

A) True 
 B)False

Question 16

What impact would a substantial cut in marginal tax rates have on real GDP?

Accepted Answer

A) It would increase real GDP in the short run but not the long run. 
B) It would decrease real GDP in the short run but not the long run. 
C) It would decrease real GDP in the short run and long run. 
D) It would increase real GDP in the short run and the long run. 
A) It would increase real GDP in the short run but not the long run. 
B) It would decrease real GDP in the short run but not the long run. 
C) It would decrease real GDP in the short run and long run. 
D) It would increase real GDP in the short run and the long run.

Question 17

Suppose the federal government buys $20 million worth of computers.If the MPC is 0.60,what will be the impact on aggregate demand,other things being equal?

Accepted Answer

A) Aggregate demand will increase $12 million. 
B) Aggregate demand will increase $13.33 million. 
C) Aggregate demand will increase $20 million. 
D) Aggregate demand will increase $50 million. 
A) Aggregate demand will increase $12 million. 
B) Aggregate demand will increase $13.33 million. 
C) Aggregate demand will increase $20 million. 
D) Aggregate demand will increase $50 million.

Question 18

The Canadian federal income tax is a regressive tax.

Accepted Answer

A) True 
 B)False

Question 19

In the open economy,budget deficits decrease the demand for money,decrease interest rates,and lead to a decrease in the value of the dollar relative to other currencies.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following circumstances will shift AD to the left,other things being equal?

Accepted Answer

A) when the government budget surplus increases because government purchases rose 
B) when the government budget surplus increases because transfer payments rose 
C) when the government budget surplus decreases because taxes rose 
D) when the government budget surplus decreases because government purchases rose 
A) when the government budget surplus increases because government purchases rose 
B) when the government budget surplus increases because transfer payments rose 
C) when the government budget surplus decreases because taxes rose 
D) when the government budget surplus decreases because government purchases rose

How does a change in taxes primarily affect aggregate demand?

What type of expenditures comprises the largest component of provincial and local government budgets?

A tax cut has a greater effect on AD than an equivalent increase in government spending.

The issuance of debt involves some intergenerational transfer of income; long after the debt is issued,a new generation of taxpayers must make interest payments on the debt.

If MPC is 0.8,what size effect would a $200 billion increase in government purchases have on the "first round" of induced added consumption?

What type of tax is the current Canadian income tax an example of?

If the government wanted to move the economy out of a current recession,which of the following might be an appropriate policy action?

Which of the following is an example of a progressive tax?

What will an increase in government purchases or a decrease in taxes,other things being equal,tend to do?

Once Statistics Canada identifies an economic downturn,the Department of Finance must formulate a new budget and the politicians must approve it in Parliament.What is the term for the time it takes for this to occur?

Figure 10-2 -Refer to Figure 10-2.If the economy is currently at full-employment equilibrium and there is an increase in the value of the Canadian dollar,what will the short-run equilibrium be?

If the MPC is 2/3,2/3 of the effect of an increase in government purchases on aggregate demand will come from increased consumption.

If government increases its purchases by $20 billion and the MPC is 0.9,what will the resulting increase in the consumption component of AD be?

Due to crowding-out effects,other things being equal,in what direction will net exports and investment tend to move in relation to a change in transfer payments?

If government purchases exceed tax revenue,there is a budget deficit.

What impact would a substantial cut in marginal tax rates have on real GDP?

Suppose the federal government buys $20 million worth of computers.If the MPC is 0.60,what will be the impact on aggregate demand,other things being equal?

The Canadian federal income tax is a regressive tax.

In the open economy,budget deficits decrease the demand for money,decrease interest rates,and lead to a decrease in the value of the dollar relative to other currencies.

Which of the following circumstances will shift AD to the left,other things being equal?

The Role and Method of Economics

Scarcity, trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Introduction to the Macroeconomy

Measuring Economic Performance

Economic Growth in the Global Economy

Aggregate Demand

Aggregate Supply and Macroeconomic Equilibrium

Money and the Banking System

The Bank of Canada

Monetary Policy

International Trade

International Finance

Filters

Exam 10: Fiscal Policy

How does a change in taxes primarily affect aggregate demand?

What type of expenditures comprises the largest component of provincial and local government budgets?

A tax cut has a greater effect on AD than an equivalent increase in government spending.

The issuance of debt involves some intergenerational transfer of income; long after the debt is issued,a new generation of taxpayers must make interest payments on the debt.

If MPC is 0.8,what size effect would a $200 billion increase in government purchases have on the "first round" of induced added consumption?

What type of tax is the current Canadian income tax an example of?

If the government wanted to move the economy out of a current recession,which of the following might be an appropriate policy action?

Which of the following is an example of a progressive tax?

What will an increase in government purchases or a decrease in taxes,other things being equal,tend to do?

Once Statistics Canada identifies an economic downturn,the Department of Finance must formulate a new budget and the politicians must approve it in Parliament.What is the term for the time it takes for this to occur?

Figure 10-2 -Refer to Figure 10-2.If the economy is currently at full-employment equilibrium and there is an increase in the value of the Canadian dollar,what will the short-run equilibrium be?

If the MPC is 2/3,2/3 of the effect of an increase in government purchases on aggregate demand will come from increased consumption.

If government increases its purchases by $20 billion and the MPC is 0.9,what will the resulting increase in the consumption component of AD be?

Due to crowding-out effects,other things being equal,in what direction will net exports and investment tend to move in relation to a change in transfer payments?

If government purchases exceed tax revenue,there is a budget deficit.

What impact would a substantial cut in marginal tax rates have on real GDP?

Suppose the federal government buys $20 million worth of computers.If the MPC is 0.60,what will be the impact on aggregate demand,other things being equal?

The Canadian federal income tax is a regressive tax.

In the open economy,budget deficits decrease the demand for money,decrease interest rates,and lead to a decrease in the value of the dollar relative to other currencies.

Which of the following circumstances will shift AD to the left,other things being equal?

The Role and Method of Economics

Scarcity, trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Introduction to the Macroeconomy

Measuring Economic Performance

Economic Growth in the Global Economy

Aggregate Demand

Aggregate Supply and Macroeconomic Equilibrium

Money and the Banking System

The Bank of Canada

Monetary Policy

International Trade

International Finance

Filters