Question 1

Below is some data for a hypothetical economy:
 
-Refer to the information above to answer this question.What is the value of the government's budget at equilibrium income?

Accepted Answer

A)  In deficit by $40
B)  In surplus by $40
C)  In deficit by $190
D)  In deficit by $20
E)  In surplus by $20F) A) and D)
G) A) and B)

Question 2

What has been happening to the Canadian National debt since WW II? To the debt/GDP ratio?

Accepted Answer

The debt has been increasing until recen...

Question 3

Graphically,what would cause the aggregate demand curve to shift to the right?

Accepted Answer

A)  An increase in taxes.
B)  A decrease in government spending on goods and services.
C)  An increase in net tax revenues.
D)  Counter-cyclical fiscal policy and a recessionary gap.
E)  Counter-cyclical fiscal policy and an inflationary gap.F) B) and D)
G) D) and E)

Question 4

Assume that the economy is in a recession and has a balanced budget.If the government increases its spending to reduce unemployment,what will happen to GDP and the government's budget?

Accepted Answer

A)  GDP will rise and the budget will be in a deficit.
B)  GDP will fall and the budget will be in a deficit.
C)  GDP will rise and the budget will be in a surplus.
D)  GDP will fall and the budget will be in a surplus.E) A) and D)
F) None of the above

Question 5

Which of the following is not a likely outcome of counter-cyclical fiscal policy?

Accepted Answer

A)  It will reduce aggregate demand if used to eliminate an inflationary gap.
B)  It will increase interest rates if used to eliminate an inflationary gap.
C)  It will likely raise the exchange rate if used to eliminate an inflationary gap.
D)  It can always be directed at a specific region of the country.
E)  It will likely reduce unemployment if used to eliminate an inflationary gap.F) C) and D)
G) B) and D) C

Question 6

What determines the state of the government's budget?

Accepted Answer

A)  The level of its spending.
B)  Its tax rates.
C)  Its tax rates and the exchange rate.
D)  Both the level of GDP in the economy as well as tax rates and its own spending.
E)  Both the level of GDP in the economy as well as tax rates and the exchange rate.F) A) and D)
G) None of the above D

Question 7

Which of the following statements concerning a budget deficit is true?

Accepted Answer

A)  It is smaller if the economy is in the midst of a severe recession.
B)  It is smaller if the economy is experiencing strong aggregate demand.
C)  It reduces the size of the national debt.
D)  It can be measured in terms of the amount of unemployment that it causes.E) All of the above
F) A) and D)

Question 8

What is true about the national debt since the 1960s until the 1990s?

Accepted Answer

A)  It grew both absolutely and as a percentage of GDP.
B)  It grew absolutely but has declined as a percentage of a GDP.
C)  It grew absolutely but remained constant as a percentage of GDP.
D)  It declined absolutely,but increased as a percentage of GDP.E) A) and D)
F) A) and C)

Question 9

Suppose that the economy is experiencing both an inflationary gap and a budget surplus.Which of the following is true?

Accepted Answer

A)  Attempts to balance the budget would be pro-cyclical.
B)  Attempts to balance the budget would be counter-cyclical.
C)  Attempts to balance the budget would eliminate or reduce the size of the gap.
D)  Reducing the size of the gap would reduce the surplus.E) A) and B)
F) A) and C)

Question 10

Those who advocate a balanced budget 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 an effective way of avoiding extreme levels of unemployment or inflation.
C)  The economy is 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 serious problem.F) B) and E)
G) A) and E)

Question 11

What will be the effect on the multiplier of a decrease in autonomous taxes?

Accepted Answer

A)  It will decrease.
B)  It will increase.
C)  There will be no effect on the multiplier.
D)  Cannot be determined without more information.E) B) and D)
F) B) and C)

Question 12

Suppose an economy is in a recession and the government is experiencing a budget deficit. What will be a possible effect of the government's decision to borrow money in order to increase spending and real GDP?"

Accepted Answer

A)  The government borrowing will increase the supply of money,causing interest rates to fall and investment spending to be crowded out.
B)  The government borrowing will increase the demand for money,causing interest rates to rise and investment spending to be crowded out.
C)  There will be no effect of government borrowing on investment spending or real GDP.
D)  The government borrowing will increase the demand for money causing interest rates to rise and investment spending to increase.E) C) and D)
F) B) and C)

Question 13

Given the following data for the economy of Mokka:
  a)Calculate equilibrium GDP.
b)Calculate the multiplier.
c)If the tax function is: T = 30 + 0.2Y,calculate the government's budget balance.
d)Now change government spending by the amount of the surplus or deficit in an attempt to balance the budget.What will be the new equilibrium GDP?
e)What is the budget balance at the new equilibrium?

Accepted Answer

a)$1025
b)2.5
c)Budget surplus of $20.
d)$1,075
e)Budget surplus of $10.

Question 14

What are automatic stabilizers? How do they work?

Accepted Answer

An automatic stabilizer is any governmen...

Question 15

What are the three schools of thought on fiscal policy?

Accepted Answer

One school of thought,countercyclical fi...

Question 16

All of the following,except one,are correct statements.Which is the exception?

Accepted Answer

A)  Provincial and municipal governments in total have realized budget surpluses in some years.
B)  The public debt is the accumulation of all the federal government's deficits and surpluses of the past.
C)  The public debt refers to the debts of all units of government: federal,provincial and local.
D)  The foreign portion of the public debt has been eliminated over the past decade.E) B) and D)
F) B) and C)

Question 17

Assume that in the economy of Utrea,the MPC is 0.8 and the multiplier is 3 and that both government spending and autonomous taxes are increased by $40.In what direction and by how much will equilibrium GDP change?

Accepted Answer

GDP will i...

Question 18

What is the result of using balanced-budget fiscal policy when both a recessionary gap and a budget deficit exist?

Accepted Answer

A)  The recessionary gap would be reduced and the budget deficit would fall.
B)  The recessionary gap would increase and the budget deficit would fall.
C)  The recessionary gap would be reduced and the budget deficit would rise.
D)  The recessionary gap would increase and the budget deficit would rise.E) A) and C)
F) A) and B)

Question 19

To whom does the federal government owe most of its debt?

Accepted Answer

The federal government owes most of its ...

Question 20

In 2015,in Canada,what percentage of the national debt was owned by foreigners?

Accepted Answer

A)  None
B)  5%
C)  16%
D)  26%
E)  50%F) B) and D)
G) A) and D)

Exam 7: Fiscal Policy

Below is some data for a hypothetical economy: -Refer to the information above to answer this question.What is the value of the government's budget at equilibrium income?

Correct Answer
verified

What has been happening to the Canadian National debt since WW II? To the debt/GDP ratio?

Correct Answer
verified
The debt has been increasing until recen...
View Answer

Graphically,what would cause the aggregate demand curve to shift to the right?

Correct Answer
verified

Assume that the economy is in a recession and has a balanced budget.If the government increases its spending to reduce unemployment,what will happen to GDP and the government's budget?

Correct Answer
verified

Which of the following is not a likely outcome of counter-cyclical fiscal policy?

Correct Answer
verified
C

What determines the state of the government's budget?

Correct Answer
verified
D

Which of the following statements concerning a budget deficit is true?

Correct Answer
verified

What is true about the national debt since the 1960s until the 1990s?

Correct Answer
verified

Suppose that the economy is experiencing both an inflationary gap and a budget surplus.Which of the following is true?

Correct Answer
verified

Those who advocate a balanced budget fiscal policy would agree with all but one of the following statements.Which is the exception?

Correct Answer
verified

What will be the effect on the multiplier of a decrease in autonomous taxes?

Correct Answer
verified

Suppose an economy is in a recession and the government is experiencing a budget deficit. What will be a possible effect of the government's decision to borrow money in order to increase spending and real GDP?"

Correct Answer
verified

Correct Answer
verified
a)$1025 b)2.5 c)Budget surplus of $20. d)$1,075 e)Budget surplus of $10.

What are automatic stabilizers? How do they work?

Correct Answer
verified
An automatic stabilizer is any governmen...
View Answer

What are the three schools of thought on fiscal policy?

Correct Answer
verified
One school of thought,countercyclical fi...
View Answer

All of the following,except one,are correct statements.Which is the exception?

Correct Answer
verified

Assume that in the economy of Utrea,the MPC is 0.8 and the multiplier is 3 and that both government spending and autonomous taxes are increased by $40.In what direction and by how much will equilibrium GDP change?

Correct Answer
verified
GDP will i...
View Answer

What is the result of using balanced-budget fiscal policy when both a recessionary gap and a budget deficit exist?

Correct Answer
verified

To whom does the federal government owe most of its debt?

Correct Answer
verified
The federal government owes most of its ...
View Answer

In 2015,in Canada,what percentage of the national debt was owned by foreigners?

Correct Answer
verified

Exam 7: Fiscal Policy

Below is some data for a hypothetical economy: -Refer to the information above to answer this question.What is the value of the government's budget at equilibrium income?

Correct AnswerverifiedShow Answer

What has been happening to the Canadian National debt since WW II? To the debt/GDP ratio?

Correct AnswerverifiedThe debt has been increasing until recen...View AnswerShow Answer

Graphically,what would cause the aggregate demand curve to shift to the right?

Correct AnswerverifiedShow Answer

Assume that the economy is in a recession and has a balanced budget.If the government increases its spending to reduce unemployment,what will happen to GDP and the government's budget?

Correct AnswerverifiedShow Answer

Which of the following is not a likely outcome of counter-cyclical fiscal policy?

Correct AnswerverifiedC

What determines the state of the government's budget?

Correct AnswerverifiedD

Which of the following statements concerning a budget deficit is true?

Correct AnswerverifiedShow Answer

What is true about the national debt since the 1960s until the 1990s?

Correct AnswerverifiedShow Answer

Suppose that the economy is experiencing both an inflationary gap and a budget surplus.Which of the following is true?

Correct AnswerverifiedShow Answer

Those who advocate a balanced budget fiscal policy would agree with all but one of the following statements.Which is the exception?

Correct AnswerverifiedShow Answer

What will be the effect on the multiplier of a decrease in autonomous taxes?

Correct AnswerverifiedShow Answer

Suppose an economy is in a recession and the government is experiencing a budget deficit. What will be a possible effect of the government's decision to borrow money in order to increase spending and real GDP?"

Correct AnswerverifiedShow Answer

Correct Answerverifieda)$1025 b)2.5 c)Budget surplus of $20. d)$1,075 e)Budget surplus of $10.

What are automatic stabilizers? How do they work?

Correct AnswerverifiedAn automatic stabilizer is any governmen...View AnswerShow Answer

What are the three schools of thought on fiscal policy?

Correct AnswerverifiedOne school of thought,countercyclical fi...View AnswerShow Answer

All of the following,except one,are correct statements.Which is the exception?

Correct AnswerverifiedShow Answer

Assume that in the economy of Utrea,the MPC is 0.8 and the multiplier is 3 and that both government spending and autonomous taxes are increased by $40.In what direction and by how much will equilibrium GDP change?

Correct AnswerverifiedGDP will i...View AnswerShow Answer

What is the result of using balanced-budget fiscal policy when both a recessionary gap and a budget deficit exist?

Correct AnswerverifiedShow Answer

To whom does the federal government owe most of its debt?

Correct AnswerverifiedThe federal government owes most of its ...View AnswerShow Answer

In 2015,in Canada,what percentage of the national debt was owned by foreigners?

Correct AnswerverifiedShow Answer

Correct Answer
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The debt has been increasing until recen...
View Answer

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C

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D

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a)$1025 b)2.5 c)Budget surplus of $20. d)$1,075 e)Budget surplus of $10.

Correct Answer
verified
An automatic stabilizer is any governmen...
View Answer

Correct Answer
verified
One school of thought,countercyclical fi...
View Answer

Correct Answer
verified

Correct Answer
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GDP will i...
View Answer

Correct Answer
verified

Correct Answer
verified
The federal government owes most of its ...
View Answer

Correct Answer
verified