1 Which of the following statements regarding fiscal policy is true?

the multiplier effect increases the magnitude of the impact of a change in government spending

the higher the value of the marginal propensity to consume, the lower the value of the multiplier

automatic stabilizers require explicit governmental action.

A fiscal expansion cannot be implemented if it implies a rising government deficit.

2 We say that money serves as a unit of account because it represents::

something you can use to purchase goods and services.

a standard unit of comparison.

a certain amount of purchasing power held over time.

something you can directly offer, like any good or service, in exchange for some good or service you want.

3 As new goods and services become available:

the basket of goods used to calculate the CPI doesn't change until 75 percent of urban consumers use new goods.

the basket of goods used to calculate the CPI immediately changes to reflect them.

Statistics Canada will occasionally update the basket used to calculate the CPI to account both for substitution between goods and services and new products.

the basket of goods used to calculate the CPI never changes to reflect them.

4 When the Canadian price level increases, we would expect:

a movement down and along the aggregate demand curve.

a shift to the right of the aggregate demand curve.

a shift to the left of the aggregate demand curve.

a movement up along the aggregate demand curve.

5 When the government runs a deficit and finances it by borrowing, it causes:

an increase in the availability of loanable funds for the private sector, which causes the cost of borrowing to increase.

the cost of borrowing to decrease, which will shift the supply curve of loanable funds to the left.

the cost of borrowing to decrease, which will cause crowding out.

A decrease in the availability of loanable funds for the private sector, which causes the cost of borrowing to increase