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A recessionary gap can best be described as the amount by which: A:injections exceed withdrawals at the level of potential output. B:equilibrium output falls short

  1. A "recessionary gap" can best be described as the amount by which: A:injections exceed withdrawals at the level of potential output. B:equilibrium output falls short of potential output. C:equilibrium output exceeds potential output. D: real expenditures exceed potential output.
  2. Aggregate supply factors: A:are consumption, investment, government, and net export spending. B:include input prices and productivity. C:explain why real output and the price level are directly related. D:explain the shape of the aggregate supply curve.
  3. An "inflationary gap" can best be described as the amount by which: A: real expenditures fall short of potential output. B:withdrawals exceed injections at the level of potential output. C: real expenditures exceed any given level of real output. D:equilibrium output exceeds potential output.
  4. An increase in government purchases may:A:do all of the above. B: increase real output and employment. C:shift the aggregate demand curve leftward. D:decrease real output.
  5. Assume that the economy is operating below its potential output. Under these conditions, government fiscal policy should be directed toward a(n): A: decrease in government purchases and/or tax increases. B: increase in both government purchases and taxes. C:decrease in both government purchases and taxes. D:increase in government purchases and/or tax cuts.
  6. Categories of Fiscal policy include: A:None of the above. B:Discretionary and Contractionary. C:Discretionary and Personal. D:Discretionary and Countercyclical
  7. Discretionary Fiscal Policy is described as: A:budget surplus spending (spending < revenues) to ease the pressures of aggregate demand during inflationary peaks of the business cycle. B:budget deficit spending (spending > revenue) to support aggregate demand, output and employment during recessions. C:all of the above is discretionary fiscal policy. D:a deliberate government plan to alter spending and/or taxation policies in order to influence output and employment.
  8. During an economic expansion: A:households and businesses spend more due to growing optimism about the future. B:the aggregate demand curve shifts leftward. C:exports tend to decrease. D:households and businesses spend less due to growing pessimism about the future
  9. Fiscal policy refers to: A: the authority that the Prime Minister has to change personal income tax rates. B: changes in government purchases or taxes that has the effect of destabilizing the economy. C: changes in taxes and government purchases made by legislation for the purpose of stabilizing the economy. D:the changes in taxes and transfers that occur as output changes.
  10. If a person writes a cheque on a Saskatoon bank to purchase a new car, he or she is employing money as: A: a measure of value. B:a means of exchange. C:a store of purchasing power. D:all of the above.
  11. If aggregate demand increases and aggregate supply decreases, the price level:A: and real output will both decrease. B:and real output will both increase. C:will decrease, but real output may either increase or decrease. D: will increase, but real output may either increase or decrease.
  12. If chartered banks lower their reserve ratio: A:the size of the money multiplier will increase. B:none of the others will occur. C:they will be prompted to reduce their lending. D:the actual cash reserves of the chartered banks will increase
  13. If the federal government attempts to eliminate a budget deficit during a depression, these efforts will: A:reduce the severity of the depression. B:contribute to inflation. C:shift the investment demand curve to the right. D:intensify the depression.
  14. If the quantity of money demanded exceeds the money supply, it can be expected that the: A:interest rate will rise. B:interest rate will fall. C: money demand curve will shift leftward. D:money supply curve will shift rightward.
  15. If the reserve ratio is 5 percent, then the money multiplier for the banking system will be: A:5. B:20. C:1/20. D:1/5
  16. If you are estimating your total expenses for school next year, you are using money as:A:a store of purchasing power. B:a measure of value. C: all of the above. D:a means of exchange.
  17. If you place a part of your summer earnings as cash in a safety deposit box, you are employing money as: A:a store of purchasing power. B:a measure of value. C: all of the above. D:a means of exchange.
  18. In any economy: A:taxes and saving are leakages, while investment and government purchases are injections. B:government purchases and saving are injections, while investment and taxes are leakages. C:taxes and government purchases are leakages, while investment and saving are injections. D:taxes and investment are injections, while saving and government purchases are leakages.
  19. In Canada, the M1 definition of the money supply is composed of: A:currency outside chartered banks and publicly held demand deposits at chartered banks. B:currency outside chartered banks and all notice deposits at both chartered banks and near banks. C:currency outside chartered banks and notice deposits at chartered banks. D:all currency and demand deposits at chartered banks.
  20. In terms of problems with Fiscal Policy, a "recognition lag" is:A: the timely "decision" to be made once a problem has been realized by economists. B: the variation in economic conditions from region to region. C:the delay between problems and its ramifications. D:the time a policy has been approved and the time it takes to have an affect.
  21. Money functions as: A:a store of purchasing power. B:all of the above. C:a measure of value. D: a means of exchange
  22. Objectives of the Bank of Canada include all of the following EXCEPT:A: to control and protect the value of the Canadian Dollar.B:to issue all currency to financial institutions and consumers. C:to promote the economic and financial welfare of Canada. D:to regulate credit and currency in the best interests of economic life of the nation.
  23. The aggregate demand curve: A:shows the amount of real output that will be purchased at each possible price level. B:.is downward-sloping, because a higher price level makes production more profitable. C:shows the amount of real output that will be produced at each possible price level. D:is upward-sloping, because a higher price level makes production more profitable.
  24. The difference between M1 and M2 is that the:A:latter includes cash held by chartered banks. B:former includes notice deposits at chartered banks. C:latter includes government bonds. D:latter includes notice and personal term deposits at chartered banks.
  25. The effect of an increase in personal tax rates is to: A: increase the dollar amounts of consumption and saving at each level of real output and to increase the size of the spending multiplier. B:decrease the dollar amounts of consumption and saving at each level of real output, but not to change the size of the spending multiplier. C:decrease the dollar amounts of consumption and saving at each level of real output and increase the size of the spending multiplier. D:decrease the dollar amounts of consumption and saving at each level of real output and to reduce the size of the spending multiplier.
  26. The factors that affect the amounts that consumers, businesses, government, and foreigners wish to purchase at each price level are the: A:sole determinants of personal income. B:aggregate supply factors. C:aggregate demand factors. D: sole determinants of the equilibrium price level and equilibrium real output.
  27. The multiplier effect means that: A:an increase in spending can cause aggregate demand to change by a larger amount. B:an increase in consumption can precipitate a larger increase in government purchases. C:consumption is typically several times larger than withdrawals. D: a small decline in MPC can cause aggregate demand to rise by several times that amount.
  28. The spending multiplier is calculated using the formula: A:1 / MPW. B: (1 - MPW) / MPC. C:(1 - MPC) / MPW. D: 1 / MPC
  29. Which of the following would not shift the aggregate supply curve? A:a decline in business taxes. B:a decline in the price of imported oil. C: an increase in the price level. D:an increase in labour productivity
  30. Which one of the following would not shift the aggregate demand curve? A:an increase in personal income tax rates. B:a depreciation of the international value of the Canadian dollar. C:a decline in the interest rate at each possible price level. D:a change in the price level.

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