Question 1

Consider the government's budget balance.Suppose G = 2500 and the government's net tax revenue is equal to 0.2Y.When Y = 11 000,the government is running a budget
A)deficit of 1500.
B)surplus of 300.
C)balance.
D)deficit of 300.
E)surplus of 1500.

Accepted Answer

The government's budget balance can be expressed as: 
Budget Balance = Net Tax Revenue - Government Spending 
When Y = 11 000: 
Net Tax Revenue = 0.2Y = 0.2(11 000) = 2200 
Government Spending = G = 2500 
Budget Balance = 2200 - 2500 = -300 
A negative budget balance indicates a budget deficit, therefore the correct answer is D) deficit of 300.

Question 2

Consider the government's budget balance.Suppose G = 300 and the government's net tax revenue is equal to 0.14Y.When Y = 2000,the government is running a budget
A)deficit of 20.
B)surplus of 20.
C)balance.
D)deficit of -20.
E)surplus of 40.

Accepted Answer

The government's net tax revenue is 0.14Y, so when Y = 2000, the net tax revenue is 0.14 * 2000 = 280. Since G (government spending) is 300, the government's budget balance is 280 - 300 = -20, indicating a deficit of 20.

Question 3

Consider the government's budget balance.Suppose G = 500 and the government's net tax revenue is equal to 0.2Y.The government budget is balanced when Y equals
A)2000.
B)2200.
C)2400.
D)2500.
E)2800.

Accepted Answer

D

Question 4

Consider the government's budget balance.Suppose G = 400 and the government's net tax revenue is 20% of national income (Y).Government saving is negative for all values of Y
A)above 10 000.
B)above 8000.
C)above 2000.
D)below 8000.
E)below 2000.

Accepted Answer

The answer of Consider the government's budget balance.Suppose G =...

Question 5

Consider the government's budget balance.Suppose G = 500 and the government's net tax revenue is equal to 0.25Y.When Y = 2920,the government is running a budget
A)deficit of 730.
B)surplus of 230.
C)balance.
D)deficit of 230.
E)surplus of 730.

Accepted Answer

The answer of Consider the government's budget balance.Suppose G =...

Question 6

Consider the government's budget balance.Suppose G = 300 and the government's net tax revenue is equal to 0.12Y.The government budget is balanced when Y equals
A)350.
B)1000.
C)2000.
D)2500.
E)3600.

Accepted Answer

The answer of Consider the government's budget balance.Suppose G =...

Question 7

Consider the government's budget balance.Suppose G = 2500 and the government's net tax revenue is equal to 0.2Y.The government budget is balanced when Y equals
A)9500.
B)10 500.
C)11 500.
D)12 500.
E)13 500.

Accepted Answer

The government budget is balanced when government spending (G) equals net tax revenue. Given G = 2500 and net tax revenue = 0.2Y, setting 2500 = 0.2Y and solving for Y gives Y = 12,500.

Question 8

Transfer payments made by the government affect its net tax revenues
A)directly.
B)indirectly through government purchases.
C)indirectly through net exports.
D)indirectly through the investment function.
E)indirectly through the consumption function.

Accepted Answer

Transfer payments made by the government directly affect its net tax revenues by reducing them.

Question 9

Consider the government's budget balance.Suppose G = 600 and the government's net tax revenue is 10% of Y.The government budget is balanced when Y equals
A)660.
B)1320.
C)3000.
D)4500.
E)6000.

Accepted Answer

The answer of Consider the government's budget balance.Suppose G =...

Question 10

Why are exports treated as autonomous expenditure in our simple macro model? Because
A)exports typically do not change as a result of a change in Canadian national income.
B)exports are always constant in dollar terms.
C)they are a component of net exports,which is autonomous in our model.
D)exports are a small component in the Canadian economy and are not significant in the model.
E)exports are a function of Canadian national income,which is autonomous in our model.

Accepted Answer

Exports are considered autonomous because they are primarily determined by foreign demand and not directly by changes in Canadian national income.

Question 11

In the simple macro model,how do government transfer payments to individuals affect desired aggregate expenditure?
A)directly
B)through the consumption function
C)through business investment
D)through net exports
E)through the government's budget deficit

Accepted Answer

Government transfer payments to individuals directly affect desired aggregate expenditure through the consumption function. Transfer payments increase disposable income and therefore increase consumption spending, which is a component of aggregate expenditure.

Question 12

Consider the net tax rate,denoted by t.Which of the following correctly defines the net tax rate?
A)It is total tax revenue minus transfer payments.
B)It is the sum of the federal income tax rate plus an average of provincial income tax rates.
C)It is the increase in net tax revenue when national income rises by one dollar.
D)It is the sum of all government tax revenues.
E)Both A and C are correct.

Accepted Answer

The net tax rate is defined as the increase in net tax revenue when national income rises by one dollar, reflecting the marginal tax rate.

Question 13

Consider a simple macro model with a constant price level and demand-determined output.The inclusion of government in such a model affects desired aggregate expenditure directly through ________ and indirectly through ________.
A)the net taxes; the government purchases of goods and services
B)the net taxes; its effect on disposable income
C)the government purchases of goods and services; its effect on net exports
D)the government purchases of goods and services; its effect on disposable income
E)the government purchases of goods and services; its effect on investment

Accepted Answer

The inclusion of government affects desired aggregate expenditure directly through the government purchases of goods and services (as this is a direct injection into the economy) and indirectly through its effect on disposable income (since government taxes and transfers affect the income available to households, which in turn influences their consumption spending).

Question 14

If the government's net tax rate increases,then for a given level of national income disposable income will ________ and net tax revenue will ________.
A)decrease; decrease
B)decrease; increase
C)increase; increase
D)increase; decrease
E)not change; increase

Accepted Answer

An increase in the government's net tax rate reduces disposable income because individuals have less income after taxes. However, net tax revenue for the government increases because it collects more taxes at the higher rate.

Question 15

Suppose real national income (Y)is equal to 800 and government purchases are equal to 200.If the government's net tax revenues are equal to tY,where t is the net tax rate,then what is the value of t necessary for the government to have a balanced budget?
A)20%
B)25%
C)30%
D)35%
E)40%

Accepted Answer

For the government to have a balanced budget, its tax revenues must equal its expenditures. Given that government purchases are 200, and tax revenues are tY (where Y = 800), we need to find the value of t that makes tax revenues equal to 200. Setting tY = 200 and substituting Y = 800 gives us t*800 = 200. Solving for t gives t = 200/800 = 0.25, or 25%.

Question 16

When economists use the term "budget surplus" they are referring to
A)net tax revenues minus government purchases.
B)national income minus transfer payments.
C)national income minus consumption.
D)disposable income minus consumption.
E)net tax revenues minus transfer payments.

Accepted Answer

A budget surplus occurs when net tax revenues exceed government expenditures on goods and services.

Question 17

Consider the government's budget balance.Suppose G = 300 and the government's net tax revenue is 0.3Y.The government budget is in surplus only when Y is
A)less than 350.
B)less than 1000.
C)greater than 1000.
D)greater than 2500.
E)greater than 3000.

Accepted Answer

The government budget is in surplus when its revenue exceeds its spending. Here, the government's spending (G) is 300, and its net tax revenue is 0.3Y. For a budget surplus, 0.3Y > 300. Solving for Y gives Y > 1000.

Question 18

Suppose Y = 400 and the government's net tax rate is 10%.If we are told that the government has a budget surplus,then government purchases must be
A)greater than 30.
B)less than 30.
C)greater than 40.
D)less than 40.
E)Not enough information to know.

Accepted Answer

The answer of Suppose Y = 400 and the government's...

Question 19

The G and T components in the national-income accounts measure purchases and net taxes collected by
A)all levels of government.
B)only provincial governments and the federal government.
C)only the federal government.
D)only provincial governments.
E)only local governments.

Accepted Answer

The G and T components in the national-income accounts measure purchases and net taxes collected by all levels of government, including federal, provincial, and local governments.

Question 20

Why are government expenditures such as Old Age Security payments,employment insurance payments,or welfare benefits paid to individuals not considered part of G,the government component of aggregate expenditure?
A)These are transfer payments and place no direct demand on Canada's total output.
B)These payments are directly included as part of C,consumption,because they become consumption expenditure for the recipient.
C)Since the revenues from which these payments are made did not originate from tax collection,they are not considered part of G.
D)Since these expenditures are transfers from recipients to taxpayers,they are not included in G.
E)These payments are included in G only when the payments are made directly by the federal government.

Accepted Answer

Government expenditures such as Old Age Security payments, employment insurance payments, or welfare benefits paid to individuals are considered transfer payments. Transfer payments do not directly demand goods and services from firms or place any direct demand on Canada's total output. Therefore, they are not considered part of G, the government component of aggregate expenditure, which refers to government purchases of goods and services that directly demand goods and services from firms.

Quiz 22: Adding Government and Trade to the Simple Macro Model

Consider the government's budget balance.Suppose G = 2500 and the government's net tax revenue is equal to 0.2Y.When Y = 11 000,the government is running a budget

Consider the government's budget balance.Suppose G = 300 and the government's net tax revenue is equal to 0.14Y.When Y = 2000,the government is running a budget

Consider the government's budget balance.Suppose G = 500 and the government's net tax revenue is equal to 0.2Y.The government budget is balanced when Y equals

Consider the government's budget balance.Suppose G = 400 and the government's net tax revenue is 20% of national income (Y) .Government saving is negative for all values of Y

Consider the government's budget balance.Suppose G = 500 and the government's net tax revenue is equal to 0.25Y.When Y = 2920,the government is running a budget

Consider the government's budget balance.Suppose G = 300 and the government's net tax revenue is equal to 0.12Y.The government budget is balanced when Y equals

Consider the government's budget balance.Suppose G = 2500 and the government's net tax revenue is equal to 0.2Y.The government budget is balanced when Y equals

Transfer payments made by the government affect its net tax revenues

Consider the government's budget balance.Suppose G = 600 and the government's net tax revenue is 10% of Y.The government budget is balanced when Y equals

Why are exports treated as autonomous expenditure in our simple macro model? Because

In the simple macro model,how do government transfer payments to individuals affect desired aggregate expenditure?

Consider the net tax rate,denoted by t.Which of the following correctly defines the net tax rate?

Consider a simple macro model with a constant price level and demand-determined output.The inclusion of government in such a model affects desired aggregate expenditure directly through and indirectly through .

If the government's net tax rate increases,then for a given level of national income disposable income will and net tax revenue will .

Suppose real national income (Y) is equal to 800 and government purchases are equal to 200.If the government's net tax revenues are equal to tY,where t is the net tax rate,then what is the value of t necessary for the government to have a balanced budget?

When economists use the term "budget surplus" they are referring to

Consider the government's budget balance.Suppose G = 300 and the government's net tax revenue is 0.3Y.The government budget is in surplus only when Y is

Suppose Y = 400 and the government's net tax rate is 10%.If we are told that the government has a budget surplus,then government purchases must be

The G and T components in the national-income accounts measure purchases and net taxes collected by

Why are government expenditures such as Old Age Security payments,employment insurance payments,or welfare benefits paid to individuals not considered part of G,the government component of aggregate expenditure?