1. Fill in the blanks to make the following statements correct. a. The government's budget constraint shows that total government expenditures must be equal to the sum of __________ and __________. b. The government's annual budget deficit is the excess of total __________ over total __________ in a given year. c. If we want to know how much of a government's budget deficit is attributable to current program spending and tax policies, we compute the __________ deficit. This measure tells us the difference between the government's overall budget deficit and its __________ payments. d. If the government's total budget deficit is $20 billion and its debt-service payments are $18 billion, then its __________ is $2 billion. If the total budget deficit is $20 billion and its debt-service payments are $26 billion, then its __________ is $6 billion. 2. Fill in the blanks to make the following statements correct. a. The overall unemployment rate in Canada is not a good indicator of the level of activity in the labour market because it does not indicate __________. b. Gross flow in the labour market are much __________ than net flows in the labour market. c. In a typical month in Canada, __________ workers flow in each direction between unemployment and employment. d. Cyclical unemployment exists when real GDP is __________ than potential GDP. When real GDP is equal to potential GDP, then all unemployment is either __________ or __________. e. Non-market-clearing theories assume that wages do not instantly __________ to clear the market. A recessionary gap can persist and result in unemployment that is __________. 3. Fill in the blanks to make the following statements correct. a. When there is no change in the government's fiscal policy it is still possible for the budget deficit to fall because __________. b. For a given set of fiscal policies, the budget deficit __________ as real GDP rises and __________ as real GDP falls. c. The structural budget deficit is the deficit that would exist if real GDP equalled __________ and the government's __________ were at their current levels. d. During a recession, when Y is less that Y*, the actual budget deficit is __________ than the structural budget deficit. During an inflationary boom, when Y is greater than Y*, the actual budget deficit is __________ than the structural budget deficit. e. Suppose the real interest rate is 2 percent and the growth rate of real GDP is 1.5 percent. If the government wants to stabilize the debt-to-GDP ratio, then it is necessary to have a(n) __________