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1 | |
An example of stabilization policy is: |
| | A) | raising government purchases during a period of high unemployment. |
| | B) | raising taxes during a period of high unemployment. |
| | C) | raising government purchases during a period of high inflation. |
| | D) | cutting taxes during a period of high inflation. |
| | E) | none of the above |
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2 | |
Which of the following is an expansionary fiscal policy? |
| | A) | cutting government purchases and simultaneously raising taxes |
| | B) | raising both government purchases and taxes |
| | C) | cutting both taxes and government purchases |
| | D) | raising government purchases and simultaneously cutting taxes |
| | E) | none of the above |
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3 | |
The purpose of a contractionary fiscal policy is to: |
| | A) | iincrease both aggregate demand and equilibrium output. |
| | B) | eliminate an inflationary gap. |
| | C) | decrease both aggregate supply and equilibrium output. |
| | D) | eliminate a recessionary gap. |
| | E) | increase both aggregate supply and equilibrium output. |
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4 | |
Automatic stabilizers work in the following way when the economy exhibits a recessionary gap: |
| | A) | Government expenditures are high and tax revenues are low, which has a contractionary effect. |
| | B) | Government expenditures are low and tax revenues are high, which has an expansionary effect. |
| | C) | Government expenditures are high and tax revenues are low, which has an expansionary effect. |
| | D) | Government expenditures are low and tax revenues are high, which has a contractionary effect. |
| | E) | Government expenditures and taxes are both low, which has a contractionary effect. |
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5 | |
An $100 increase in a person's income causes him to increase his saving by $10, his imports by $25, and his tax payments by $30. In this case, the marginal propensity to withdraw is: |
| | A) | .40. |
| | B) | .30. |
| | C) | .35. |
| | D) | .65. |
| | E) | .60 |
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6 | |
In an economy with a marginal propensity to consume of .33, the spending multiplier has a value of: |
| | A) | 1.5 |
| | B) | .67 |
| | C) | 3 |
| | D) | .33 |
| | E) | 6 |
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7 | |
If policy-makers increase government purchases by $9 billion in an economy with an MPW of .6, then the aggregate demand curve shifts: |
| | A) | rightward by $22.5 billion. |
| | B) | leftward by $22.5 billion. |
| | C) | rightward by $15 billion. |
| | D) | leftward by $15 billion. |
| | E) | none of the above |
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8 | |
A $5 billion decrease in taxes in an economy with an MPC of .5 causes aggregate demand to shift: |
| | A) | leftward by $10 billion. |
| | B) | rightward by $5 billion. |
| | C) | rightward by $10 billion. |
| | D) | leftward by $5 billion. |
| | E) | none of the above |
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9 | |
A benefit of fiscal policy is that: |
| | A) | it tends to be politically invisible. |
| | B) | it has little impact on public debt levels. |
| | C) | it has very short time lags. |
| | D) | it can be focused on particular regions of the country. |
| | E) | it has long lags. |
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10 | |
A budget surplus occurs when: |
| | A) | government expenditures exceed government revenues. |
| | B) | government revenues exceed government expenditures. |
| | C) | government assets exceed government liabilities. |
| | D) | the government runs an expansionary fiscal policy. |
| | E) | government liabilities exceed government assets. |
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11 | |
Which of the following budget principles presumes that policy-makers should be primarily concerned with stabilization policy? |
| | A) | functional finance |
| | B) | cyclically balanced budgets |
| | C) | annually balanced budgets |
| | D) | public finance. |
| | E) | none of the above |
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12 | |
Based on Say's Law, neoclassical economists believed that: |
| | A) | periods of underspending in the economy are short-lived. |
| | B) | demand always creates its own supply. |
| | C) | total withdrawals and injections are equal at only one possible output level. |
| | D) | interest rates do not fluctuate to bring withdrawals and injections into balance. |
| | E) | wages are not flexible. |
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13 | |
In the theories of John Maynard Keynes: |
| | A) | the economy automatically corrects high unemployment. |
| | B) | workers are assumed to be influenced by money illusion. |
| | C) | labour supply is dependent on real wages. |
| | D) | Say's Law is assumed to be valid. |
| | E) | labour demand is not related to the wage rate. |
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14 | |
Commentators who suggest that Canada's public debt is not a significant problem emphasize: |
| | A) | public debt's benefits when the government pursues an expansionary fiscal policy. |
| | B) | the productive assets created through government spending. |
| | C) | the fact that Canada's public debt as a percentage of GDP has been higher in the past. |
| | D) | that public debt is, by and large, owed to Canadians. |
| | E) | all of the above |
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15 | |
Critics of the size of Canada's public debt argue that: |
| | A) | public debt charges as a percentage of GDP have recently been at their highest levels ever. |
| | B) | high levels of public debt have had only a minor effect on the amount of private investment. |
| | C) | provincial and territorial debt is insignificant in comparison with public debt. |
| | D) | taxes can continually be raised in order to finance government activity. |
| | E) | none of the above |
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