It May Be Necessary to Cut the Deficit as Part

question 51

Multiple Choice

It may be necessary to cut the deficit as part of a credible anti-inflationary policy because the public knows that large deficits ________.

• A) are inflationary by themselves in the long run
• B) create inefficiencies
• C) put pressure on the Bank of Canada to expand the money supply to keep interest rates from rising
• D) put pressure on the Bank of Canada to contract the money supply to prevent employment from rising

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Definitions:

Tax Rate

The percentage at which an individual or corporation is taxed.

Marginal Tax Rate

The rate at which the last dollar of income is taxed, reflecting the percentage of tax paid on any additional dollar earned.

Average Tax Rate

The ratio of the total amount of taxes paid to the total income of the taxpayer, indicating the burden of taxation.

Federal Personal Income Tax

A tax levied by the federal government on individuals’ earnings, varying in rate based on income level.