5.0

Question 1

Keynesian Revolution established that government should spend in _____ and save in _______

Answer 1

bad days

good days

Question 2

are triggered by “objective” changes in the economy

Answer 2

automatic stabilizers

Question 3

are implemented automatically

Answer 3

automatic stabilizers

Question 4

if unemployment rises, employment insurance payments

Answer 4

increase

Question 5

is justified if automatic stabilizers fail or are thought to fail in moderating the business cycle

Answer 5

discretionary fiscal policy action

Question 6

moderating the business cycle is called

Answer 6

counter-cyclical fiscal policy

Question 7

primary goal of fiscal policy in the Keynesian sense is to

Answer 7

moderate the business cycle, to stabilize the economy

Question 8

tool provided by Keynes to allow the government to stabilize the business cycle without having to do it all itself

Answer 8

the Multiplier

Question 9

If aggregate supply is elastic GEM will be

Answer 9

large

Question 10

if AS is inelastic GEM will be

Answer 10

small

Question 11

the higher the MPC the _____ the slope of the AEC and _____ GEM

Answer 11

steeper

greater

Question 12

the lower the MPC the _____ the slope of the AEC and _____ the GEM

Answer 12

gentler

lower

Question 13

act as automatic stabilizers

Answer 13

taxes

Question 14

is immediately spent

Answer 14

autonomous expenditure

Question 15

a decrease in autonomous tax is only

Answer 15

partially spent

Question 16

discretionary policy can suffer from

Answer 16

policy lags

Question 17

in an upturn, the unemployment insurance fund _____ while outflow _____

Answer 17

increases

diminishes

Question 18

in downturn, income _____ and marginal taxes ______

Answer 18

fall

decreases

Question 19

during upswing of business cycle, interest rate

Answer 19

rises

Question 20

rising interest rates attracts

Answer 20

foreign investment

Question 21

Canadian exports becoming more expensive shifts the aggregate demand curve

Answer 21

left

Question 22

during downturn Canadian interest rates tend to fall and foreign investments

Answer 22

decline

Question 23

reduction of the foreign exchange rate makes Canadian exports _______ and causes an _______ in domestic AD

Answer 23

less expensive

increase

Question 24

assuming price stability, an expansionary fiscal policy will push __________ by the __________

Answer 24

• aggregate planned demand up

- the change times the appropriate multiplier

Question 25

involves a decrease in Gov. expenditure, transfers and or an increase in taxes

Answer 25

contractionary fiscal policy

Question 26

contractionary fiscal policy will lead to a _______ in AD at the __________

Answer 26

• decrease

- same price level times the appropriate multiplier

Question 27

there is some unemployment if the economy is

Answer 27

below potential GDP

Question 28

expansionary fiscal policy fails, there is no increase in real GDP and the only change is an increase in price level if

Answer 28

the economy is at potential

Question 29

if taxes rise, cost of production______ and the ASC shift _____

Answer 29

increases

left

Question 30

if taxes fall the ASC will shift _____ and ______ potential GDP

Answer 30

right

increase

Question 31

have an effect on both the AD and the AS

Answer 31

taxes

Question 32

policy tools lose effectiveness once taxes reach

Answer 32

0