Question : 111) As a global recession began in late 2008, the : 1384416

111) As a global recession began in late 2008, the governments of all major economies searched for policy responses to dampen the effects of the recession. In general, governments were aiming to

A) shift the AD curve to the left by decreasing tax rates.

B) increase potential GDP.

C) shift the AS curve to the right through large increases in government spending.

D) shift the AD curve to the right through large increases in government spending.

E) shift the AS curve to the left by increasing wage rates.

112) Consider the global recession that began in late 2008. In terms of the AD/AS model, which of the following statements best describes the macroeconomic effect on Canada’s economy?

A) The AD curve shifted to the right due to reduced demand for Canadian exports, which created a recessionary gap.

B) The AD curve shifted to the left due to reduced demand for Canadian exports, which created a recessionary output gap.

C) The AS curve shifted to the right due to increased factor prices, which created a recessionary gap.

D) The AS curve shifted to the left due to increased factor prices, which created a recessionary gap.

E) Potential GDP fell, which reduced actual national income.

113) Income taxes in Canada can be considered to be automatic stabilizers because tax

A) revenues increase when income increases, thereby offsetting some of the increase in aggregate demand.

B) revenues decrease when income increases, thereby intensifying the increase in aggregate demand.

C) structures can be changed when the Minister of Finance brings down a budget.

D) revenues are changed through discretionary fiscal policy to keep the budget balanced.

E) revenues are changed through discretionary fiscal policy to create surpluses in recessions.

114) An important automatic fiscal stabilizer in Canada is

A) the exchange rate.

B) the marginal propensity to consume.

C) the marginal propensity to import.

D) the income-tax system.

E) government purchases of goods and services.

115) Automatic fiscal stabilizers are most helpful in

A) making discretionary fiscal policy effective.

B) removing persistent output gaps.

C) promoting economic growth.

D) eliminating price fluctuations in the economy.

E) reducing the intensity of business cycles.

116) “Automatic fiscal stabilization” in the economy refers to

A) the properties of government spending and taxation that cause the simple multiplier to be increased.

B) the discretionary fiscal policies that are automatically undertaken by the government when there is a recessionary gap.

C) the properties of government spending and taxation that cause the simple multiplier to be reduced.

D) the discretionary fiscal policies that are automatically undertaken by the government when there is an inflationary gap.

E) all discretionary fiscal policies.

117) Net tax revenues that rise with national income act as an automatic stabilizer by ________ the marginal propensity to spend and thereby causing the simple multiplier to ________.

A) increasing; increase

B) increasing; decrease

C) decreasing; equal one

D) decreasing; decrease

E) decreasing; increase

118) Consider the simplest macro model with demand-determined output. Other things being equal, the ________ the value of the simple multiplier, the ________ stable is real GDP in response to shocks to autonomous spending.

A) larger; more

B) larger; less

C) smaller; more

D) smaller; less

E) both B and C are correct

119) Consider a simple macro model with demand-determined output. Which of the following parameters will produce the strongest automatic stabilizer?

A) MPC = 0.8, t = 0.2, m = 0.3

B) MPC = 0.7, t = 0.3, m = 0.2

C) MPC = 0.7, t = 0.1, m = 0.4

D) MPC = 0.9, t = 0.2, m = 0.4

E) MPC = 0.8, t = 0.1, m = 0.2

120) Consider a simple macro model with demand-determined output. Which of the following parameters will produce the largest fluctuations in real GDP from autonomous expenditure shocks?

A) MPC = 0.8, t = 0.2, m = 0.3

B) MPC = 0.7, t = 0.3, m = 0.2

C) MPC = 0.7, t = 0.1, m = 0.4

D) MPC = 0.9, t = 0.2, m = 0.4

E) MPC = 0.8, t = 0.1, m = 0.2