Question 1

Fiscal policies promoting savings can increase aggregate supply by providing loanable funds to businesses.

Accepted Answer

A) True 
 B)False

Question 2

Ronald Reagan, Margaret Thatcher and Ontario Premier Mike Harris were all supply-siders.

Accepted Answer

A) True 
 B)False

Question 3

Tax cuts are a fiscal policy to counter an inflationary gap by causing a negative demand shock.

Accepted Answer

A) True 
 B)False

Question 4

Statements about what is are called

Accepted Answer

A)   positive statements.
B)   normative statements.
C)   economic statements.
D)   scientific statements.
E)   hypotheses.

Question 5

Automatic stabilizers counteract business cycles, and steer the economy back towards potential GDP.

Accepted Answer

A) True 
 B)False

Question 6

Education and training create positive externalities, promoting economic growth.

Accepted Answer

A) True 
 B)False

Question 7

The government's fiscal year for budgets runs from April 1 to March 31, rather than the calendar year of January 1 to December 31.

Accepted Answer

A) True 
 B)False

Question 8

The largest source of revenues for the federal government is

Accepted Answer

A)   transfer payments.
B)   spending on products and services.
C)   personal income taxes.
D)   corporate income taxes.
E)   GST and HST taxes.

Question 9

Which statement is positive?

Accepted Answer

A)   Monetary policies should follow rules.
B)   Government should not intervene in the economy.
C)   Borrowing to spend leads to crowding in.
D)   Tax cuts are better than spending increases.
E)   Spending cuts are better than tax increases.

Question 10

Political hands-off arguments against government are often presented as arguments against the national debt.

Accepted Answer

A) True 
 B)False

Question 11

During a recession, tax revenues

Accepted Answer

A)   fall and transfers decrease.
B)   fall and transfers increase.
C)   rise and transfers decrease.
D)   rise and transfers increase.
E)   remain constant and transfers increase.

Question 12

When identifying inputs that expanding the circular flow and increases aggregate supply, economists do not include

Accepted Answer

A)   government.
B)   capital.
C)   land.
D)   resources.
E)   entrepreneurship.

Question 13

Crowding out occurs when debt interest payments become self-perpetuating.

Accepted Answer

A) True 
 B)False

Question 14

Which statement is positive?

Accepted Answer

A)   Tax cuts will increase government revenues.
B)   Governments should not use tax incentives to encourage saving.
C)   Governments should increase spending to counteract recessions.
D)   Governments should pay down the national debt.
E)   Governments should balance the budget over the business cycle.

Question 15

Fiscal policies increase potential GDP if they

Accepted Answer

A)   increase the quantity of inputs.
B)   increase the quality of inputs.
C)   create incentive effects.
D)   create supply-side effects.
E)   do any of the above.

Question 16

Positive externalities are costs that affect others external to a choice or a trade.

Accepted Answer

A) True 
 B)False

Question 17

"Yes - Markets Self-Adjust" camp economists recommend government spending increases during a recessionary gap.

Accepted Answer

A) True 
 B)False

Question 18

There is a structural deficit when government spending is greater than revenue

Accepted Answer

A)   during a deflation.
B)   during a recessionary gap.
C)   during an inflationary gap.
D)   and the national debt is decreasing.
E)   when the economy is at potential GDP.

Question 19

Ricardian equivalence is the argument that government spending financed by going into debt will have no impact on the economy.

Accepted Answer

A) True 
 B)False

Question 20

With automatic stabilizers, when the economy goes into an expansion, a budget deficit is automatically created.

Accepted Answer

A) True 
 B)False

Exam 12: Spending Others Money: Fiscal Policy, Deficits, and National Debt

When identifying inputs that expanding the circular flow and increases aggregate supply, economists do not include

Correct AnswerverifiedShow Answer

Automatic stabilizers counteract business cycles, and steer the economy back towards potential GDP.

Correct AnswerverifiedShow Answer

Ronald Reagan, Margaret Thatcher and Ontario Premier Mike Harris were all supply-siders.

Correct AnswerverifiedShow Answer

Ricardian equivalence is the argument that government spending financed by going into debt will have no impact on the economy.

Correct AnswerverifiedShow Answer

Tax cuts are a fiscal policy to counter an inflationary gap by causing a negative demand shock.

Correct AnswerverifiedShow Answer

Statements about what is are called

Correct AnswerverifiedShow Answer

Fiscal policies promoting savings can increase aggregate supply by providing loanable funds to businesses.

Correct AnswerverifiedShow Answer

There is a structural deficit when government spending is greater than revenue

Correct AnswerverifiedShow Answer

"Yes - Markets Self-Adjust" camp economists recommend government spending increases during a recessionary gap.

Correct AnswerverifiedShow Answer

During a recession, tax revenues

Correct AnswerverifiedShow Answer

With automatic stabilizers, when the economy goes into an expansion, a budget deficit is automatically created.

Correct AnswerverifiedShow Answer

Positive externalities are costs that affect others external to a choice or a trade.

Correct AnswerverifiedShow Answer

Education and training create positive externalities, promoting economic growth.

Correct AnswerverifiedShow Answer

The government's fiscal year for budgets runs from April 1 to March 31, rather than the calendar year of January 1 to December 31.

Correct AnswerverifiedShow Answer

Which statement is positive?

Correct AnswerverifiedShow Answer

Crowding out occurs when debt interest payments become self-perpetuating.

Correct AnswerverifiedShow Answer

Which statement is positive?

Correct AnswerverifiedShow Answer

The largest source of revenues for the federal government is

Correct AnswerverifiedShow Answer

Fiscal policies increase potential GDP if they

Correct AnswerverifiedShow Answer

Political hands-off arguments against government are often presented as arguments against the national debt.

Correct AnswerverifiedShow Answer

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