Lec23 iC Questions

Question 1

Starting in long-run equilibrium, if global growth decreases, an example of an automatic fiscal policy response is:

a) An increase in interest rates
b) A decrease in government spending
c) An increase in employment insurance payments
d) An increase in average tax rates
e) None of the above

Answer 1

c) An increase in employment insurance payments

Question 2

The most likely scenario for discretionary expansionary fiscal policy is:

a) Economic expansion, interest rates at 6%
b) Economic recession, interest rates at 2%
c) Economic expansion, interest rates at 0.25%
d) Economic recession, interest rates at 0.25%
e) None of the above

Answer 2

d) Economic recession, interest rates at 0.25%

Question 3

Which of the following would cause an increase in the long-run growth rate of GDP per capita?

a) An increase in population growth
b) An increase in tax rates and government spending on education and health-care
c) A decrease in tax rates and government spending on education and health-care
d) None of the above

Answer 3

b) An increase in tax rates and government spending on education and health-care
c) A decrease in tax rates and government spending on education and health-care
d) None of the above

Question 4

Which of the following economic policies would have a significant positive effect on long-run economic growth in Canada?

a) Increasing the basic tax exemption for seniors
b) Reducing the tax rate in the lowest tax bracket by 2%
c) removing the carbon tax
d) Removing the GST from the sale of newly built homes
e) None of the above

Answer 4

e) None of the above

Question 5

Consider the IS-MP-PC model. In the short-run, a lower tax rate would cause:

a) Lower unemployment, lower inflation
b) Lower unemployment, higher inflation
c) Higher unemployment, lower inflation
d) Higher unemployment, higher inflation
e) None of the above

Answer 5

b) Lower unemployment, higher inflation

Question 6

Consider the loanable funds model. In the long-run, (all else equal), a lower average tax rate would cause:

a) Higher investment
b) Higher interest rates
c) Lower investment
d) Lower interest rates
e) None of the above

Answer 6

b) Higher interest rates