Question :
111) An annually balanced government budget would tend to
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111) An annually balanced government budget would tend to
A) accentuate the swings in national income that accompany changes in autonomous expenditure flows.
B) increase national income in response to changes in autonomous expenditure flows.
C) reduce national income in all circumstances.
D) reduce national income in response to changes in autonomous expenditure flows.
E) reduce the swings in national income that accompany changes in autonomous expenditure flows.
112) Most economists believe that balancing the government budget over the business cycle, rather than for each fiscal year,
A) is absolutely necessary for prudent management of the economy.
B) is the same as an annually balanced budget.
C) is a worthy idea but requires accurate forecasting and definition of the business cycle.
D) would be pro-cyclical.
E) would stabilize the economy and produce an annual budget balance of zero.
113) If the government were able to operate a “cyclically balanced budget,” then the actual budget would
A) be balanced every year.
B) be balanced every four years.
C) have surpluses during inflationary gaps.
D) have surpluses during recessionary gaps.
E) have deficits during inflationary gaps.
114) The Canadian tax and transfer system acts as an automatic stabilizer because
A) net tax revenues decrease during economic booms and decrease during economic recessions.
B) net tax revenues increase during economic booms and decrease during economic recessions.
C) tax rates will automatically decrease to stimulate the economy during economic booms.
D) tax rates will automatically increase if the government is running deficits.
E) tax rates will automatically increase to stimulate the economy during economic recessions.
115) Suppose the government decided to ensure that its cyclically adjusted budget deficit was always zero. This policy would be problematic because
A) it would act as a built-in destabilizer.
B) it would entail a rising debt-to-GDP ratio.
C) it would tend to mean that net exports would be crowded out.
D) it would require continual fiscal expansion.
E) it would require continual fiscal contraction.
116) Transfer payments (such as welfare payments and employment-insurance benefits) act as automatic stabilizers because they
A) decrease the swings of the business cycle but make an annually balanced budget much harder to achieve.
B) increase the swings of the business cycle but make an annually balanced budget much easier to achieve.
C) increase the swings of the business cycle and make an annually balanced budget much harder to achieve.
D) increase the government surplus during the expansionary phase of the business cycle.
E) increase the debt-to-GDP ratio during the expansionary phase of the business cycle.
117) Suppose legislation in Canada required annually balanced government budgets. This legislation would
A) require the Bank of Canada to expand and contract the money supply according to an annual timetable.
B) force a balanced budget that could turn a minor downturn in the economy into a serious and prolonged recession.
C) force increased levels of government spending automatically increasing the size of the government debt.
D) allow deficits but prevent the government from running surpluses.
E) require the Bank of Canada to lower interest rates during periods of inflation.
118) Annually balanced government budgets
A) are easy to implement due to the total control of government over its budget components in the short run.
B) would allow the level of government expenditures to be independent of the changes in real GDP.
C) would reduce the size of output gaps.
D) would undermine the success of stabilization policies implemented by the government.
E) would require the federal government to control both fiscal and monetary policy.
119) Implementation of cyclically balanced government budgets
A) result in larger output gaps than with annually balanced budgets.
B) requires precise prediction of potential GDP to pinpoint the stages of the business cycle.
C) eliminates the need for built-in fiscal stabilizers.
D) is easier with frequent changes in political power.
E) is successfully practiced in Canada.
120) The 2008-2009 global recession had an effect on Canadian federal and provincial budgets. In general, government debt-to-GDP ratios rose in Canada because of
A) contractionary monetary policy and expansionary fiscal policy.
B) an increased burden of debt-service payments due to the necessary reduction in the target overnight interest rate by the central bank.
C) the decline in net tax revenues due to the recession, as well an expansionary fiscal policy.
D) the necessity to balance the primary budget at the same time that the interest rate on government debt was rising.
E) the necessity to balance the cyclically adjusted budget at the same time that the interest rate on government debt was rising.
