during the 2008-2010 recession, the Canadian government introduced its fiscal expansionary Economic Action Plan to stimulate the Canadian economy. For this time period, we can conclude that the budget balance (BB) of Canada will ____ and the structural budget balance (SBB) of Canada will ____ . For simplicity, assume that BB=SBB=0 before 2008.

Question 26Select one:

a.Decrease; stay constant

b.Decrease; decrease

c.Increase; decrease

d.Increase; stay constant

If the expenditure multiplier is 4 and government expenditure rises by 25, this will shift the AE upward by ____ and the AD rightward by ____ .

Question 27Select one:

a.4; 100

b.25; 100

c.4; 25

d.25; 400

For a given fluctuation in autonomous expenditure, economies with higher income tax rate (t) will:

Question 28Select one:

a.Experience no business cycle fluctuations in real GDP and employment

b.Experience larger business cycle fluctuations in real GDP and employment only if the government runs a balanced budget

c.Experience some business cycle fluctuations in real GDP and employment, but the fluctuations are independent of t

d.Experience smaller business cycle fluctuations in real GDP and employment

The structural budget balance evaluates the budget balance when the economy is ____.

Question 29Select one:

a.In a boom

b.In a recession

c.At its current actual GDP

d.At potential GDP

During the 2008 recession, the Canadian government opted for an injection of fiscal spending into its economy. Canadian induced expenditure was 0.6Y, the marginal propensity to import was 0.04, and the government wanted to close a recessionary gap of $50million. How much should the Canadian government have spent?

Question 30Select one:

a.$25 million

b.$10 million

c.$15 million

d.$20 million