Not on macroeconomics test

Question 1

What is a Labour Union?

Answer 1

An organization of workers promoting members’ interests and negotiating with employers.

Question 2

Three most common types of unions?

Answer 2

Trade (Craft) Unions: Represent workers in a single occupation (e.g., IBEW in construction).
Industrial Unions: Represent all workers in an industry (e.g., CAW).
Public Sector Unions: Represent government employees (e.g., CUPE).

Question 3

What are Stabilization Policies?

Answer 3

Definition: Government policies designed to mitigate the effects of the business cycle.
Expansionary Policy: Aims to reduce unemployment and stimulate output.
Contractionary Policy: Aims to stabilize prices and reduce output

Question 4

Fiscal vs Monetary Policy

Answer 4

• Fiscal Policy: Uses taxes and government purchases.
• Monetary Policy: Uses interest rates and the money supply.

Question 5

Expansionary and Contractionary Fiscal Policy

Answer 5

Expansionary Fiscal Policy: Increases government purchases and/or lowers taxes to shift AD rightward.
Contractionary Fiscal Policy: Decreases government purchases and/or increases taxes to shift AD leftward

Question 6

Contracting vs Expanding Economy

Answer 6

• Contracting Economy: Decreases net tax revenues, increasing spending and incomes.
• Expanding Economy: Increases net tax revenues, decreasing spending and incomes.

Question 7

Discretionary Policies and Automatic Stabilizers

Answer 7

• Discretionary Policies: Intentional government interventions.
• Automatic Stabilizers: Built-in measures like taxes and transfer payments that automatically counteract business cycle fluctuations.

Question 8

Benefits and Drawbacks of Fiscal Policy

Answer 8

Benefits:
Can target specific regions.
Has a direct impact on spending.
Drawbacks:
Subject to delays (recognition lag, decision lag, impact lag).
Closely related to public debt from past borrowing.

Question 9

What is comparative advantage

Answer 9

Comparative Advantage
Ability to produce goods at a lower opportunity cost than trading partners.
Encourages specialization and trade for mutual benefit.
Key for understanding international trade dynamics.

Question 10

Explain three trade barriers.

Answer 10

• Tariffs
  Definition: Taxes on imported goods.
  Purpose: Protect domestic industries.
  Impact: Increases prices, can trigger trade wars (e.g., Smoot-Hawley Tariff).
• Quotas
  Definition: Limits on the quantity of imports.
  Purpose: Protect domestic industries.
  Impact: Higher prices, potential shortages.
• Subsidies
  Definition: Government financial support to domestic producers.
  Purpose: Lower production costs, increase competitiveness.
  Impact: Market distortion, possible trade disputes.

Question 11

Types of Taxation(Direct and Indirect)

Answer 11

• Direct Taxes: Burden of payment falls directly on the individual or entity responsible for paying the tax(cannot be transferred)
• Indirect Taxes: Burden of payment can passed onto another(taxes on goods and services)
• Progressive Taxation: The more you make the more you pay
• Regressive Taxation: Everyone pays the same

Question 12

Five types of taxation

Answer 12

• Personal Income Taxes: A tax imposed on the income(wages and salaries, interest, dividends, capital gains, transfer payments) individuals earn. Payable to federal and provincial.
• Corporate Income Taxes: A tax as a percentage of a company’s annual profits. Payable to Federal and provincial.
• Sales Taxes: Tax imposed on the consumption of goods and services by end users. Payable to Federal and provincial.
• Excise Taxes: A fixed tax amount per unit on specific products (gasoline, liquor, tobacco). Payable to Federal and provincial.
• Property Taxes: Tax on the value of buildings and land. Payable to Municipal.

Question 13

Why is competition seen as a positive factor in a market economy?

Answer 13

• Increases Consumer Choice: More quantity and variety of goods.
• Increases Entrepreneurial Freedom: Few barriers to entry for producers.
• Encourages Investment and Growth: Healthy competition leads to better products and services.
• Keeps Prices Down and product quality high: Increased pressure on firms to provide high-quality products at competitive prices.
• Improves resource allocation and
  efficiency: Efficient use of productive resources allows firms to generate profits.

Question 14

Why does the government have to spend money?

Answer 14

• Redistributing Income: Reducing inequality through social welfare programs and progressive taxation.
• Ensuring Stability and Confidence: Maintaining economic stability and restoring confidence during crises.
• Public services(Education, Health care)
• Imports to obtain resources we can’t obtain naturally
• Investment into public services can lead to the creation of more jobs(multiplier effect)
• Stabilization Policies
• Stabilizing the Economy: Managing the business cycle through fiscal policies to stimulate growth or control inflation.