Question 1

Refer to the above graph.If the economy was initially in equilibrium at point 3 and interest rates increase by 4 percentage points, then the crowding-out effect would be:

Accepted Answer

A)  $10 billion in investment.
B)  $20 billion in investment.
C)  $30 billion in investment.
D)  $35 billion in investment.E) A) and B)
F) None of the above

Question 2

(1)  The composite index of leading indicators turns downward for three consecutive months; (2)  Economists reach agreement that the economy is moving into a recession; (3)  A tax cut is proposed in Parliament; (4)  The tax cut is passed by Parliament; (5)  Consumption spending begins to rise, aggregate demand increases, and the economy begins to recover.Refer to the above information.The recognition lag of fiscal policy is reflected in events:

Accepted Answer

A)  1 and 2.
B)  2 and 3.
C)  3 and 4.
D)  4 and 5.E) A) and D)
F) B) and C)

Question 3

Refer to the above diagram wherein T is tax revenues and G is government expenditures.All figures are in billions.The equilibrium level of GDP in this economy:

Accepted Answer

A)  is $400.
B)  is greater than $400.
C)  is less than $400.
D)  cannot be determined from the information given.E) C) and D)
F) None of the above

Question 4

Contractionary fiscal policy will do what to the government budget, assuming that was balanced at the start?

Accepted Answer

A)  A budget deficit
B)  A budget surplus
C)  An increase in interest rates
D)  A decrease in personal taxesE) B) and C)
F) A) and D)

Question 5

An expansionary fiscal policy in Canada might unintentionally cause demand-pull inflation if:

Accepted Answer

A)  the dollar unexpectedly appreciates while the expansionary policy is in place.
B)  the dollar unexpectedly depreciates while the expansionary policy is in place.
C)  the policy produces severe crowding out.
D)  our trading partners experience recession during the time of the fiscal policy action.E) A) and B)
F) B) and C)

Question 6

Refer to the above diagram where T is tax revenues and G is government expenditures.All figures are in billions of dollars.If the full-employment GDP is $400 billion while the actual GDP is $200 billion, the actual budget deficit is:

Accepted Answer

A)  $200 billion.
B)  $20 billion.
C)  $40 billion.
D)  $60 billion.E) None of the above
F) All of the above

Question 7

The "political business cycle" refers to the possibility that:

Accepted Answer

A)  incumbent politicians will be re-elected regardless of the state of the economy.
B)  politicians will manipulate the economy to enhance their chances of being re-elected.
C)  there is more inflation during Liberal administrations than during Progressive Conservative administrations.
D)  recessions coincide with election years.E) None of the above
F) A) and B)

Question 8

A decrease in government spending and taxes would be an example of fiscal policies that reinforce each other.

Accepted Answer

A) True 
 B)False

Question 9

Built-in stabilizers:

Accepted Answer

A)  intensify the business cycle.
B)  reduce the size of the multiplier.
C)  increase the government's deficit during a recession.
D)  are a part of discretionary fiscal policy.E) None of the above
F) A) and C)

Question 10

Fiscal policy refers to the:

Accepted Answer

A)  manipulation of government spending and taxes to stabilize domestic output, employment, and the price level.
B)  manipulation of government spending and taxes to achieve greater equality in the distribution of income.
C)  altering of the interest rate to change aggregate demand.
D)  fact that equal increases in government spending and taxation will be contractionary.E) B) and C)
F) All of the above

Question 11

Refer to the above diagram where T is tax revenues and G is government expenditures.All figures are in billions of dollars.If the full-employment GDP and actual GDP are each $400 billion, this economy will realize a:

Accepted Answer

A)  full-employment or structural deficit of $20 billion.
B)  cyclical deficit of $20 billion.
C)  cyclical surplus of $20 billion.
D)  full-employment deficit of zero.E) A) and B)
F) B) and C)

Question 12

Using Image 13.2 Global Perspective, which of the following countries had the highest publicly held debt as a percentage of GDP in 2015?

Accepted Answer

A)  Japan
B)  Greece
C)  Italy
D)  CanadaE) A) and D)
F) B) and D)

Question 13

If government tax revenues change automatically and in a countercyclical direction over the course of the business cycle, this would be called a(n) :

Accepted Answer

A)  discretionary fiscal policy.
B)  expansionary fiscal policy.
C)  political business cycle.
D)  nondiscretionary fiscal policy.E) B) and D)
F) B) and C)

Question 14

With the expenditures programs and the tax system shown in the above diagram:

Accepted Answer

A)  the public budget will be expansionary at all GDP levels above K, and contractionary at all GDP levels below K.
B)  the public budget will be a destabilizing force at all levels of GDP.
C)  deficits will be realized at income levels below K, and surpluses above K.
D)  deficits will be realized at income levels below H, and surpluses above H.E) B) and C)
F) A) and C)

Exam 13: Part B: Fiscal Policy, Deficits, Surpluses, and Debt

Using Image 13.2 Global Perspective, which of the following countries had the highest publicly held debt as a percentage of GDP in 2015?

Correct Answer
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Refer to the above diagram where T is tax revenues and G is government expenditures.All figures are in billions of dollars.If the full-employment GDP is $400 billion while the actual GDP is $200 billion, the actual budget deficit is:

Correct Answer
verified

An expansionary fiscal policy in Canada might unintentionally cause demand-pull inflation if:

Correct Answer
verified

Refer to the above diagram where T is tax revenues and G is government expenditures.All figures are in billions of dollars.If the full-employment GDP and actual GDP are each $400 billion, this economy will realize a:

Correct Answer
verified

Refer to the above diagram wherein T is tax revenues and G is government expenditures.All figures are in billions.The equilibrium level of GDP in this economy:

Correct Answer
verified

The "political business cycle" refers to the possibility that:

Correct Answer
verified

Correct Answer
verified

Contractionary fiscal policy will do what to the government budget, assuming that was balanced at the start?

Correct Answer
verified

If government tax revenues change automatically and in a countercyclical direction over the course of the business cycle, this would be called a(n) :

Correct Answer
verified

Fiscal policy refers to the:

Correct Answer
verified

Built-in stabilizers:

Correct Answer
verified

Refer to the above graph.If the economy was initially in equilibrium at point 3 and interest rates increase by 4 percentage points, then the crowding-out effect would be:

Correct Answer
verified

A decrease in government spending and taxes would be an example of fiscal policies that reinforce each other.

Correct Answer
verified

With the expenditures programs and the tax system shown in the above diagram:

Correct Answer
verified

Exam 13: Part B: Fiscal Policy, Deficits, Surpluses, and Debt

Using Image 13.2 Global Perspective, which of the following countries had the highest publicly held debt as a percentage of GDP in 2015?

Correct AnswerverifiedShow Answer

Refer to the above diagram where T is tax revenues and G is government expenditures.All figures are in billions of dollars.If the full-employment GDP is $400 billion while the actual GDP is $200 billion, the actual budget deficit is:

Correct AnswerverifiedShow Answer

An expansionary fiscal policy in Canada might unintentionally cause demand-pull inflation if:

Correct AnswerverifiedShow Answer

Refer to the above diagram where T is tax revenues and G is government expenditures.All figures are in billions of dollars.If the full-employment GDP and actual GDP are each $400 billion, this economy will realize a:

Correct AnswerverifiedShow Answer

Refer to the above diagram wherein T is tax revenues and G is government expenditures.All figures are in billions.The equilibrium level of GDP in this economy:

Correct AnswerverifiedShow Answer

The "political business cycle" refers to the possibility that:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Contractionary fiscal policy will do what to the government budget, assuming that was balanced at the start?

Correct AnswerverifiedShow Answer

If government tax revenues change automatically and in a countercyclical direction over the course of the business cycle, this would be called a(n) :

Correct AnswerverifiedShow Answer

Fiscal policy refers to the:

Correct AnswerverifiedShow Answer

Built-in stabilizers:

Correct AnswerverifiedShow Answer

Refer to the above graph.If the economy was initially in equilibrium at point 3 and interest rates increase by 4 percentage points, then the crowding-out effect would be:

Correct AnswerverifiedShow Answer

A decrease in government spending and taxes would be an example of fiscal policies that reinforce each other.

Correct AnswerverifiedShow Answer

With the expenditures programs and the tax system shown in the above diagram:

Correct AnswerverifiedShow Answer

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