Question

Which of the following best describe(s) automatic built-in stabilizers in Canada?
(A) Autonomous government spending automatically rises as GDP falls
(B) The higher our income tax rates, the stronger are the automatic stabilizers, and the more stable is our GDP
(C) The lower our income tax rates, the stronger are the automatic stabilizers, and the more stable is our GDP
(D) The size of the autonomous goods market multiplier varies inversely with the level of GDP

2)The government's budget balance depends on:
(A) The tax rate set by government and government expenditure on goods and services
(B) The tax rates, expenditures set by government and the level of GDP determined by AD=AS
(C) The level of potential output determined by the labour force, the capital stock and technology
(D) Canada's imports and exports of goods and services

Answer 1

1) automatic built- in stabilizers are legislation in budget ,that changes tax and government spending as soon as gdp changes, to stabilize the gdp.

Autonomous government spending Increase rises as gdp falls, to stabilize the gdp is a built in stabilizer.

Option A is right

B) budget balance depends on tax revenue and government expenditure.

Tax revenue depends on tax rate and the level of income.

So budget balance of government depends on tax rate, government spending and levels of income.

Option b is correct.