Suppose the MPC is 0.75, the net income tax rate is 0.2, and the marginal propensity to import is 0.1. What is the induced expenditure?

Question 16Select one:

a.0.75Y

b.0.5Y

c.0.65Y

d.0.8Y

Which of the following best describe(s) automatic built-in stabilizers in Canada?

Question 17Select one:

a.Autonomous government spending automatically rises as GDP falls

b.The lower our income tax rates, the stronger are the automatic stabilizers, and the more stable is our GDP

c.The size of the autonomous goods market multiplier varies inversely with the level of GDP

d.The higher our income tax rates, the stronger are the automatic stabilizers, and the more stable is our GDP

We cannot look at the direction of discretionary fiscal policy by looking at the changes in the actual fiscal budget. What is the reason?

Question 18Select one:

a.Those changes may reflect changes in the tax revenues as a result of the change in potential GDP

b.Those changes may reflect the changes in consumption habits

c.Those changes may reflect changes in the tax revenues as a result of the change in GDP

d.Those changes may reflect the changes in investment confidence

If the structural budget balance changes from -$50 billion to -$25 billion, then which of the following is CORRECT?

Question 19Select one:

a.The government has conducted contractionary fiscal policies

b.The central bank has conducted contractionary monetary policies

c.The economy is currently in a temporary recession

d.The interest payments on public debt have decreased

Consider the budget balance (BB) equation of BB = tY - G. Assume that t is 0.2, potential output is 1000, and G is 180. Which of the following statements is INCORRECT?

Question 20Select one:

a.With negative GDP gap of 20%, the budget balance is -20

b.There will be zero budget balance when Y is 900

c.The structural budget balance is 20

d.With negative GDP gap, the structural budget balance will be larger than 20