In the 2009 and 2010 Canadian federal budgets in the midst of a major global rec
ID: 1216820 • Letter: I
Question
In the 2009 and 2010 Canadian federal budgets in the midst of a major global recession, the minister of finance presented a plan to stimulate the economy. Describe the basic fiscal tools at his disposal. The basic fiscal tools are foreign trade and consumption. government spending and taxation. net exports and taxation. government spending and foreign trade. Explain the effect on GDP from an increase in spending by $5 billion. An increase in spending by $5 billion will add indirectly to aggregate demand only a fraction of which (determined by the MPC) will than be spent i.e. national income will change by less than $5 billion. indirectly to disposable income by this amount and cause an increase in national income equal to less than $5 billion due to multiplier effect. indirectly to disposable income and cause an eventual change in national income equal to $5 billion. directly to aggregate demand by this amount and lead to an eventual change in national income equal to $5 billion times the simple multiplier. Explain the effect on GDP from a tax rebate equal in value to $5 billion. A tax rebate equal in value to $5 billion will add directly to disposable income by this amount and cause an increase in national income lead to an eventual change in national income equal to $5 billion due to multiplier effect. directly to disposable income, only a fraction of which (determined by the MPC) will than be spent. indirectly to aggregate demand and cause an eventual change in national income equal to $5 billion. indirectly to aggregate demand a change in national income is unknown as it depends on the value of simple multiplier that in reality is closer to 1 than to 2. Did the minister of finance choose to emphasize increases in government spending or tax reductions in his 2009 and 2010 federal budgets? In his 2009 and 2010 federal budget the minister of finance chose to emphasize tax reductions as far as their eventual effect on national income will be larger. both increases in government spending and tax reductions as their eventual effect on national income is unpredictable. Did the minister of finance choose to emphasize increases in government spending or tax reductions in his 2009 and 2010 federal budgets? In his 2009 and 2010 federal budget the minister of finance chose to emphasize tax reductions as far as their eventual effect on national income will be larger. both increases in government spending and tax reductions as their eventual effect on national income is unpredictable. increases in government spending as far as their eventual effect on national income will be larger.Explanation / Answer
a.Describe the basic fiscal tools-
The basic fiscal tools are-
B.Government spending and taxation.
b.Explain the effect on GDP from an increase in spending by $ 5 billion
An increase in spending by $5 billion will add-
D.Directly to the aggregate demand by this amount and lead to an eventual change in national income equal to $5 billion times the simple multiplier.
Explanation-Govt. spending raises aggregate expenditure so AD curve will shift right and GDP will raise.
c.A tax rebate in value od $5 billion will add
C.Indirectly to AD and cause an eventual change in national income by $5 billion.
Explanation-Tax rate reduction has direct effect on disposable income and indirectly on AD.
In 2009-10 federal budget minister chose to emphasise-
B.both increases in govt spending and tax reductions as their eventual effect on NI unpredictable.