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A "recessionary gap" can best be described as the amount by which:

Select one:

a.real expenditures exceed potential output

b.equilibrium output exceeds potential output

c.equilibrium output falls short of potential output

d.injections exceed withdrawals at the level of potential output

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Question2

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Aggregate supply factors:

Select one:

a.explain why real output and the price level are directly related

b.are consumption, investment, government, and net export spending

c.include input prices and productivity

d.explain the shape of the aggregate supply curve

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Question3

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An "inflationary gap" can best be described as the amount by which:

Select one:

a.withdrawals exceed injections at the level of potential output

b.real expenditures fall short of potential output

c.equilibrium output exceeds potential output

d.real expenditures exceed any given level of real output

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Question4

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An increase in government purchases may:

Select one:

a.do all of the above

b.decrease real output

c.shift the aggregate demand curve leftward

d.increase real output and employment

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Question5

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Assume that the economy is operating below its potential output. Under these conditions, government fiscal policy should be directed toward a(n):

Select one:

a.increase in government purchases and/or tax cuts

b.decrease in government purchases and/or tax increases

c.increase in both government purchases and taxes

d.decrease in both government purchases and taxes

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Question6

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Categories of Fiscal policy include:

Select one:

a.Discretionary and Personal

b.None of the above

c.Discretionary and Contractionary

d.Discretionary and Countercyclical

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Question7

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Discretionary Fiscal Policy is described as:

Select one:

a.budget deficit spending (spending > revenue) to support aggregate demand, output and employment during recessions

b.all of the above is discretionary fiscal policy

c.budget surplus spending (spending < revenues) to ease the pressures of aggregate demand during inflationary peaks of the business cycle

d.a deliberate government plan to alter spending and/or taxation policies in order to influence output and employment

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Question8

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During an economic expansion:

Select one:

a.households and businesses spend more due to growing optimism about the future

b.the aggregate demand curve shifts leftward

c.households and businesses spend less due to growing pessimism about the future

d.exports tend to decrease

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Question9

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Fiscal policy refers to:

Select one:

a.changes in government purchases or taxes that has the effect of destabilizing the economy

b.the authority that the Prime Minister has to change personal income tax rates

c.the changes in taxes and transfers that occur as output changes

d.changes in taxes and government purchases made by legislation for the purpose of stabilizing the economy

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Question10

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If a person writes a cheque on a Saskatoon bank to purchase a new car, he or she is employing money as:

Select one:

a.all of the above

b.a measure of value

c.a store of purchasing power

d.a means of exchange

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Question11

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If aggregate demand increases and aggregate supply decreases, the price level:

Select one:

a.and real output will both decrease

b.will decrease, but real output may either increase or decrease

c.and real output will both increase

d.will increase, but real output may either increase or decrease

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Question12

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If chartered banks lower their reserve ratio:

Select one:

a.they will be prompted to reduce their lending

b.the actual cash reserves of the chartered banks will increase

c.the size of the money multiplier will increase

d.none of the others will occur

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Question13

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If the federal government attempts to eliminate a budget deficit during a depression, these efforts will:

Select one:

a.reduce the severity of the depression

b.intensify the depression

c.shift the investment demand curve to the right

d.contribute to inflation

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Question14

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If the quantity of money demanded exceeds the money supply, it can be expected that the:

Select one:

a.interest rate will fall

b.interest rate will rise

c.money supply curve will shift rightward

d.money demand curve will shift leftward

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Question15

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If the reserve ratio is 5 percent, then the money multiplier for the banking system will be:

Select one:

a.20

b.5

c.1/20

d.1/5

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Question16

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If you are estimating your total expenses for school next year, you are using money as:

Select one:

a.a store of purchasing power

b.a means of exchange

c.all of the above

d.a measure of value

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Question17

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If you place a part of your summer earnings as cash in a safety deposit box, you are employing money as:

Select one:

a.a store of purchasing power

b.a measure of value

c.all of the above

d.a means of exchange

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Question18

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In any economy:

Select one:

a.government purchases and saving are injections, while investment and taxes are leakages

b.taxes and investment are injections, while saving and government purchases are leakages

c.taxes and government purchases are leakages, while investment and saving are injections

d.taxes and saving are leakages, while investment and government purchases are injections

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Question19

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In Canada, the M1 definition of the money supply is composed of:

Select one:

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

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Question20

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In terms of problems with Fiscal Policy, a "recognition lag" is:

Select one:

a.the delay between problems and its ramifications

b.the timely "decision" to be made once a problem has been realized by economists

c.the time a policy has been approved and the time it takes to have an affect

d.the variation in economic conditions from region to region

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Question21

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Money functions as:

Select one:

a.a measure of value

b.a means of exchange

c.all of the above

d.a store of purchasing power

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Question22

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Objectives of the Bank of Canada include all of the following EXCEPT:

Select one:

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

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Question23

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The aggregate demand curve:

Select one:

a.is downward-sloping, because a higher price level makes production more profitable

b.shows the amount of real output that will be purchased at each possible price level

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

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Question24

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The difference between M1 and M2 is that the:

Select one:

a.latter includes notice and personal term deposits at chartered banks

b.latter includes cash held by chartered banks

c.former includes notice deposits at chartered banks

d.latter includes government bonds

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Question25

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The effect of an increase in personal tax rates is to:

Select one:

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 and to reduce the size of the spending multiplier

c.decrease the dollar amounts of consumption and saving at each level of real output, but not to change the size of the spending multiplier

d.decrease the dollar amounts of consumption and saving at each level of real output and increase the size of the spending multiplier

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Question26

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The factors that affect the amounts that consumers, businesses, government, and foreigners wish to purchase at each price level are the:

Select one:

a.sole determinants of personal income

b.aggregate demand factors

c.sole determinants of the equilibrium price level and equilibrium real output

d.aggregate supply factors

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Question27

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The multiplier effect means that:

Select one:

a.an increase in consumption can precipitate a larger increase in government purchases

b.an increase in spending can cause aggregate demand to change by a larger amount

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

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Question28

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The spending multiplier is calculated using the formula:

Select one:

a.1 / MPW

b.(1 - MPW) / MPC

c.(1 - MPC) / MPW

d.1 / MPC

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Question29

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Which of the following would not shift the aggregate supply curve?

Select one:

a.a decline in business taxes

b.an increase in the price level

c.an increase in labour productivity

d.a decline in the price of imported oil

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Question30

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Which one of the following would not shift the aggregate demand curve?

Select one:

a.an increase in personal income tax rates

b.a decline in the interest rate at each possible price level

c.a depreciation of the international value of the Canadian dollar

d.a change in the price level