Question 1

If government spending and the price level increase,then

Accepted Answer

When government spending increases, it puts pressure on the demand for goods and services, leading to an increase in the price level. With an increase in the price level, people need more money to make purchases, and banks raise interest rates to provide that money. Higher interest rates increase the cost of borrowing, therefore, consumption and investment spending decline.

Question 2

Poorly timed discretionary policy can do more harm than good.Getting the timing right with fiscal policy is generally

Accepted Answer

Timing fiscal policy correctly can be more difficult than with monetary policy because there are delays in the recognition and implementation of fiscal policies, making it harder to respond to economic changes in a timely manner. Additionally, fiscal policy needs to go through the legislative process before it can be implemented, which can also add to the timing challenge.

Question 3

An increase in government spending may expedite recovery from a recession in the short run,but in the long run,this policy may

Accepted Answer

An increase in government spending may lead to reduced investment in new capital, as there will be more demand for government goods and services, and less available funds for private investment. This policy may also make domestic firms less competitive in international markets as the dollar appreciates in value, which further decreases investment in capital. Additionally, since the government will need to fund the expenditure, this may lead to future tax rate increases, which will reduce future consumption spending. Finally, as a result of the initial increase in government spending, interest rates may also rise, which will reduce consumer expenditures on automobiles and new houses. Therefore, all of the above are correct.

Question 4

Research by Christopher Ruhm shows that people's health ________ on average during an economic ________.

Accepted Answer

Christopher Ruhm's research indicates that during economic recessions, public health tends to improve on average. This counterintuitive finding suggests that during downturns, factors such as reduced work stress and pollution, along with possibly healthier lifestyle choices when people have more time, contribute to better health outcomes.

Question 5

Increases in government spending result in ________ in the short run,and permanent increases in government spending result in ________ in the long run.

Accepted Answer

In the short run, increases in government spending result in partial crowding out, as increased government spending may lead to higher interest rates and reduced private investment. However, in the long run, permanent increases in government spending lead to complete crowding out, as the increased government borrowing leads to higher interest rates and reduced private investment, resulting in no increase in overall output or employment.

Question 6

Alberta suffered large declines in employment throughout 2015 and 2016.If the federal and provincial governments increased spending at the same time,the most likely effect (of those below)would be

Accepted Answer

The answer of Alberta suffered large declines in employment throughout...

Question 7

As spending on government purchases increases,income rises and money demand falls.

Accepted Answer

As spending on government purchases increases, income rises, which typically leads to an increase in money demand, not a decrease, because people will want to hold more money for transactions and other purposes.

Question 8

If the federal government pursues an expansionary fiscal policy at the same time as the Bank of Canada pursues an expansionary monetary policy,how might the expansionary monetary policy affect the extent of crowding out in the short run?

Accepted Answer

The answer of If the federal government pursues an expansionary...

Question 9

What impact would you expect an increase of $63 billion in federal government spending to have on the economy?

Accepted Answer

The answer of What impact would you expect an increase...

Question 10

Why will there be less crowding out of private spending by government spending the less sensitive consumption,investment,and net exports are to changes in interest rates?

Accepted Answer

The answer of Why will there be less crowding out...

Question 11

A(n)________ in private expenditures as a result of a(n)________ in government purchases is called crowding out.

Accepted Answer

Crowding out occurs when an increase in government purchases leads to a decrease in private expenditures, as government spending takes up a larger share of available resources, leaving less for the private sector.

Question 12

Following a decrease in government spending,as the price level falls we would expect the level of interest rates to ________ and investment to ________.

Accepted Answer

Following a decrease in government spending, the price level falls, leading to lower interest rates as the demand for money decreases. Lower interest rates make borrowing cheaper, which typically increases investment as businesses are more inclined to finance new projects or expansion.

Question 13

Many economists who would normally argue against government spending increases due to "crowding out" were in favour of the large economic stimulus announced in 2009.Why would these economists change their mind?

Accepted Answer

During a recession, interest rates are low and prices are falling, which makes it less likely for crowding out to occur. Therefore, the economists could have changed their minds because they saw an opportunity for government spending to boost the economy without the negative effects of crowding out.

Question 14

Crowding out,following an increase in government spending,results from

Accepted Answer

Crowding out occurs when government spending increases and it competes with private investment for available funds, driving up interest rates. This, in turn, attracts foreign investors and increases demand for the local currency, causing the exchange rate to appreciate. Therefore, the correct answer is B, higher interest rates and a higher exchange rate.

Question 15

Recessions are bad for all aspects of personal health.

Accepted Answer

While recessions can lead to increased stress and health issues due to financial strain, they can also reduce certain health risks by decreasing the prevalence of behaviors like smoking and excessive drinking due to lower disposable income, and can lead to reduced pollution levels as industrial activity slows.

Question 16

If policy makers implement an expansionary fiscal policy but do not take into account the potential for crowding out,the new equilibrium level of GDP is likely to

Accepted Answer

Expansionary fiscal policy, such as increased government spending or tax cuts, can lead to higher interest rates as the government borrows more. This can crowd out private investment because higher interest rates make borrowing more expensive for businesses and consumers. As a result, the increase in GDP might be less than anticipated, potentially leaving the economy below its potential GDP if the crowding out effect is significant enough.

Question 17

Crowding out refers to a decrease in government purchases as a result of an increase in private expenditures.

Accepted Answer

Crowding out refers to a decrease in private investment or consumption as a result of an increase in government purchases or expenditures.

Question 18

It is ________ difficult to effectively time fiscal policy than monetary policy because ________.

Accepted Answer

Fiscal policy involves changes in government spending and taxation, which often require approval from multiple branches of government and can take a longer time to implement. In contrast, monetary policy involves changes in interest rates and can be quickly decided and implemented by the central bank. Therefore, it is generally more difficult to effectively time fiscal policy than monetary policy.

Question 19

In 2009,the federal government introduced Canada's Economic Action Plan an expansionary fiscal policy to try to pull the economy out of the recession,which was

Accepted Answer

Canada's Economic Action Plan was the largest fiscal policy action in Canadian history, with a total spending of $47 billion over two years, including infrastructure investments, tax cuts, and various stimulus measures.

Question 20

Crowding out will be greater

Accepted Answer

The answer of Crowding out will be greater
...

Quiz 12: Fiscal Policy

If government spending and the price level increase,then

Poorly timed discretionary policy can do more harm than good.Getting the timing right with fiscal policy is generally

An increase in government spending may expedite recovery from a recession in the short run,but in the long run,this policy may

Research by Christopher Ruhm shows that people's health on average during an economic .

Increases in government spending result in in the short run,and permanent increases in government spending result in in the long run.

Alberta suffered large declines in employment throughout 2015 and 2016.If the federal and provincial governments increased spending at the same time,the most likely effect (of those below) would be

As spending on government purchases increases,income rises and money demand falls.

If the federal government pursues an expansionary fiscal policy at the same time as the Bank of Canada pursues an expansionary monetary policy,how might the expansionary monetary policy affect the extent of crowding out in the short run?

What impact would you expect an increase of $63 billion in federal government spending to have on the economy?

Why will there be less crowding out of private spending by government spending the less sensitive consumption,investment,and net exports are to changes in interest rates?

A(n) in private expenditures as a result of a(n) in government purchases is called crowding out.

Following a decrease in government spending,as the price level falls we would expect the level of interest rates to and investment to .

Many economists who would normally argue against government spending increases due to "crowding out" were in favour of the large economic stimulus announced in 2009.Why would these economists change their mind?

Crowding out,following an increase in government spending,results from

Recessions are bad for all aspects of personal health.

If policy makers implement an expansionary fiscal policy but do not take into account the potential for crowding out,the new equilibrium level of GDP is likely to

Crowding out refers to a decrease in government purchases as a result of an increase in private expenditures.

It is difficult to effectively time fiscal policy than monetary policy because .

In 2009,the federal government introduced Canada's Economic Action Plan an expansionary fiscal policy to try to pull the economy out of the recession,which was

Crowding out will be greater

Quiz 12: Fiscal Policy

If government spending and the price level increase,then

Poorly timed discretionary policy can do more harm than good.Getting the timing right with fiscal policy is generally

An increase in government spending may expedite recovery from a recession in the short run,but in the long run,this policy may

Research by Christopher Ruhm shows that people's health ________ on average during an economic ________.

Increases in government spending result in ________ in the short run,and permanent increases in government spending result in ________ in the long run.

Alberta suffered large declines in employment throughout 2015 and 2016.If the federal and provincial governments increased spending at the same time,the most likely effect (of those below) would be

As spending on government purchases increases,income rises and money demand falls.

If the federal government pursues an expansionary fiscal policy at the same time as the Bank of Canada pursues an expansionary monetary policy,how might the expansionary monetary policy affect the extent of crowding out in the short run?

What impact would you expect an increase of $63 billion in federal government spending to have on the economy?

Why will there be less crowding out of private spending by government spending the less sensitive consumption,investment,and net exports are to changes in interest rates?

A(n) ________ in private expenditures as a result of a(n) ________ in government purchases is called crowding out.

Following a decrease in government spending,as the price level falls we would expect the level of interest rates to ________ and investment to ________.

Many economists who would normally argue against government spending increases due to "crowding out" were in favour of the large economic stimulus announced in 2009.Why would these economists change their mind?

Crowding out,following an increase in government spending,results from

Recessions are bad for all aspects of personal health.

If policy makers implement an expansionary fiscal policy but do not take into account the potential for crowding out,the new equilibrium level of GDP is likely to

Crowding out refers to a decrease in government purchases as a result of an increase in private expenditures.

It is ________ difficult to effectively time fiscal policy than monetary policy because ________.

In 2009,the federal government introduced Canada's Economic Action Plan an expansionary fiscal policy to try to pull the economy out of the recession,which was

Crowding out will be greater

Research by Christopher Ruhm shows that people's health on average during an economic .

Increases in government spending result in in the short run,and permanent increases in government spending result in in the long run.

A(n) in private expenditures as a result of a(n) in government purchases is called crowding out.

Following a decrease in government spending,as the price level falls we would expect the level of interest rates to and investment to .

It is difficult to effectively time fiscal policy than monetary policy because .