Chapter 17

Question 1

a change in govt spending or taxation with the purpose of stimulating the economy

Answer 1

fiscal policy

Question 2

What are other things that fiscal policy helps to achieve?

Answer 2

-is another policy tool governments can use to regulate the economy
-is the use of govt spending and tax policy to influence the path of the economy over time
-the most effective fiscal policy is made at the federal level
-fiscal policy focuses strictly on government policies

Question 3

What is Budget Deficit

Answer 3

when the govt spends more money than they receive (G-T)

Question 4

What is Budget Surplus

Answer 4

when the govt receives more money in taxes than it spends (T-G)

Question 5

What is a Balanced Budget

Answer 5

when govt spending and taxes are equal

Question 6

refers to what happens with the federal govt budget each year

Answer 6

Government Deficit/Surplus

Question 7

is accumulated over time and is the sum of all past deficits and surpluses

Answer 7

Govt Debt

Question 8

a tax that is a flat percentage of income earned regardless of level of income

Answer 8

proportional tax

Question 9

a tax in which people with higher incomes pay a smaller share of their income tax

Answer 9

regressive tax

Question 10

higher incomes are taxed at higher percentages and lower incomes are taxed with lower percentages

Answer 10

progressive tax

Question 11

The categories of Federal Spending include

Answer 11

National Defense, Social Security, Health Programs and Interest Payments

Question 12

a tax based on the income receives by individuals

Answer 12

Individual Income Tax

Question 13

a tax based on the pay received from employers

Answer 13

Payroll Tax

Question 14

a tax imposed on corporate profits

Answer 14

Corporate Income Tax

Question 15

a tax on a specific good, like gasoline, tobacco and alcohol+ a tax proportion of purchases

Answer 15

Excise Tax and GST

Question 16

a tax on people who pass assets to the next generation (either after death or during form of gifts), is based on how the tax rate changes at higher incomes

Answer 16

Estate and GIFT tax

Question 17

Marginal Tax

Answer 17

is the tax rate an individual would pay on one additional dollar of income, or the tax percentage on the last dollar earned (ranges from 15-33%)

Question 18

a Canadian tax system is a _____________ tax system.

Answer 18

progressive

Question 19

the value of the tax brackets/ the thresholds of the marginal tax rates change every year due to ___________

Answer 19

inflation

Question 20

Taxes raised by canadian provinces are..

Answer 20

-property taxes
-revenue passed along from the federal govt
-personal and corporate income taxes
-a variety fees and charges

Question 21

an EXPANSIONARY Fiscal Policy ____________ the level of aggregate demand, either through _________ in govt spending or _____ in taxes

Answer 21

increases, increase, cuts

Question 22

a CONTRACTIONARY Fiscal Policy _____________ the level of aggregate demand, either through ____ in govt spending or taxes

Answer 22

decreases, cuts

Question 23

a shift in aggregate demand caused by expansionary fiscal policy can…

Answer 23

move economy to new equilibrium, any inflationary increase should be small

Question 24

a contractionary fiscal policy can..

Answer 24

shift aggregate demand down, reduce inflation

Question 25

refers to a federal transfer payment program that was first introduced in 1957 and is designed to reduce the differences in revenue-generating capacity across Canada’s 10 provinces. By compensating poorer provinces for their relatively weak tax bases or resource endowments,

Answer 25

Equalization

Question 26

helps to ensure that Canadians residing in provinces have access to a reasonably similar level of ___________ ____________ ___________ at reasonably similar levels of taxation. Another federal transfer program, __________ __________ ________ serves a similar purpose for territorial governments.

Answer 26

provincial govt services, territorial formula financing

Question 27

Discretionary/ Intentional Fiscal Policy

Answer 27

happens when the govt passes a new law that changes overall tax or spending levels with the intent of influencing the level of overall economic activity

Question 28

Automatic Stabilizers

Answer 28

tax and spending rules that have the effect of slowing down the rate of decrease in aggregate demand when the economy slows down and restrains aggregate demand when the economy speeds up ex.unemployment and food stamps

Question 29

what does the government do to maintain fiscal stability

Answer 29

the government issues bonds and securities to finance public expenditure and pay off debts

Question 30

the federal govt manages its national debt through

Answer 30

responsible borrowing practices

Question 31

a situation when govt borrowing and spending results in an increase in interest rates, which reduces business investment and consumption

Answer 31

The crowding effect

Question 32

Recognition Lag

Answer 32

the time it takes to determine that a recession has occured

Question 33

Legislative Lag

Answer 33

the time it takes to get a fiscal policy bill passed

Question 34

Implementation Lag

Answer 34

the time it takes for the funds relating to fiscal policy to be dispersed to the appropriate agencies to implement the programs

Question 35

The _____ -Balanced Budget Argument would be that low deficit means low debt which lowers interest payment

Answer 35

Pro

Question 36

The _________-Balanced Budget Argument is that running large budget deficits when used for long term investments in human capital and physical infrastructure could build the country’s long term productivity

Answer 36

Opposed

Question 37

Examples of expansionary fiscal policies during economic downturn include;

Answer 37

increased got spending on infrastructure, tax cuts, and direct transfers to households

Question 38

the total federal spending has ranged from

Answer 38

18-22% of GDP

Question 39

the largest budget deficit of canadian govt occurred during the

Answer 39

great recession

Question 40

a fiscal surplus

Answer 40

is govt budget that can lead to reduced public debt, reduced credit ratings and increased funds for future investments

Question 41

If a country’s GDP increases, but its debt also increases during that year, then the country’s debt to GDP ratio will change how?

Answer 41

increase or decrease

Question 42

If government tax policy requires Jane to pay $25,000 in taxes on annual income of $200,000 and Mary to pay $10,000 in tax on annual income of $100,000, then the tax policy is how?

Answer 42

progressive

Question 43

if the government of Saskatchewan collects $75 billion in tax revenues and spends $74.8 billion, what will be the result?

Answer 43

contractionary fiscal policy

Question 44

T or F: An increase in taxes in a contractionary fiscal policy.

Answer 44

true

Question 45

What tax and spending rules can affect aggregate demand without any changes in legislation?

Answer 45

automatic stabilizers