Question

a) CRA is providing financial support of $2,000 to Canadian citizens job losers during the Covid-19 pandemic. This tool of financial support is called fiscal policy

True or False?

b) Larger MPC means larger multiplier, this implies smaller marginal propensity to imports (MPI).

True or False?

Answer 1

1 - True.

The Canada revenue agency comes under the government of Canada and manages all the spending and revenues of government. The financial aid by CRA provided to citizens during Corona virus will thus be example of the expansionary fiscal policy.

2 - False.

The increase in MPC means the greater value of multiplier of economy , but it does not mean that the Marginal propensity to import will lower. It depends upon how much part we spend upon domestic good and how much on imports. It does not depend upon MPC. Thus given statement is false.