EC 303 Few Practice Questions
Instructions: Review all posted materials on the course website for the midterm exam. The midterm
exam consists of five short questions with parts and will cover all the posted material. You will use your
class notes to answer questions in the midterm no outside source.
1. Describe the way in which Canada is a decentralized federation. Comment on the Canadian
system of Government.
Answer: Canada’s system of government is decentralized in several ways. Most notably,
especially relative to other federal countries, is the high share of subnational government
expenditures as a share of total general government expenditures. In addition, responsibility over
core areas of public services — including healthcare, education, social services, and so on — are the
jurisdiction of provincial governments. Finally, except for only certain taxation sources (such as
customs import duties), provincial governments have access to all the major sources of taxation,
including income and consumption taxes. The historical reason for this decentralized system was the
compromises required during early Confederation negotiations between British North American
colonies. Leaving areas that were of local concern to provincial governments allowed diverse regions
to adopt different policies.
2. What is the impact of government loans to students?
Answer: See your Class notes
3. What is the fiscal policy response to COVID-19 pandemic in Canada
Answer: See your Class notes
4. If the provincial government opens a government-run daycare center, what will be the impact of
this policy on government expenditures?
Answer: This will increase the government expenditures. These government-funded running
daycare centers will also increase standard measures of the size of government, since purchases of
goods and services required to run these centers will count as government expenditures.
5. What will be the impact of reductions of tariffs on different levels of government expenditures?
Answer: Reductions in tariff rates will decrease customs import duty revenues of the federal
government. Provincial, local, and Indigenous governments do not levy tariffs on international trade
transactions, which are a strictly federal jurisdiction. But most provincial and some Indigenous
governments levy taxes on consumption goods, of which imports are a part. Trade agreements may
increase the total amount of taxable consumption spending and, therefore, may increase the
revenues of these governments.
, 6. Analyze the recent trends in the Canadian government expenditures using following data
Answer: Real per capita spending has increased from less than $21,000 to over $30,000 over this period.
Even excluding the COVID-related increase in spending in 2020, real per capita spending was over $25,000
in 2019. This indicates that total expenditures have increased at a faster rate. The size of government has
increased in terms of its real per capita size. The size of government relative to the overall economy—the
fiscal burden of government, one could say — decreased from over 47 percent in 1990 to just over 40
percent in 2019. The increase to over 52 percent of GDP in 2020 is largely accounted by COVID-related
emergency measures; excluding that year, the share of overall economic activity accounted for by
government has declined.
7. What is Public Economics? What taxes are exclusively the domain of provincial and local
governments, and the federal government does not receive any revenue from this source?
Answer: Public Economics develops principles for understanding the government's taxing and
spending activities. Property taxes are exclusively the domain of provincial and local governments,
and the federal government does not receive any revenue from this source.
8. Which factors do economists take into account in evaluating changes in the growth of government?
Answer: Population growth, size of the economy, and inflation are the factors economists take
into account in evaluating changes in the growth of government.
9. Which factor has become an increasingly large portion of total government spending in Canada in
recent years?
Answer: Health care has become an increasingly large portion of total government spending, due in
part to an aging population.
Instructions: Review all posted materials on the course website for the midterm exam. The midterm
exam consists of five short questions with parts and will cover all the posted material. You will use your
class notes to answer questions in the midterm no outside source.
1. Describe the way in which Canada is a decentralized federation. Comment on the Canadian
system of Government.
Answer: Canada’s system of government is decentralized in several ways. Most notably,
especially relative to other federal countries, is the high share of subnational government
expenditures as a share of total general government expenditures. In addition, responsibility over
core areas of public services — including healthcare, education, social services, and so on — are the
jurisdiction of provincial governments. Finally, except for only certain taxation sources (such as
customs import duties), provincial governments have access to all the major sources of taxation,
including income and consumption taxes. The historical reason for this decentralized system was the
compromises required during early Confederation negotiations between British North American
colonies. Leaving areas that were of local concern to provincial governments allowed diverse regions
to adopt different policies.
2. What is the impact of government loans to students?
Answer: See your Class notes
3. What is the fiscal policy response to COVID-19 pandemic in Canada
Answer: See your Class notes
4. If the provincial government opens a government-run daycare center, what will be the impact of
this policy on government expenditures?
Answer: This will increase the government expenditures. These government-funded running
daycare centers will also increase standard measures of the size of government, since purchases of
goods and services required to run these centers will count as government expenditures.
5. What will be the impact of reductions of tariffs on different levels of government expenditures?
Answer: Reductions in tariff rates will decrease customs import duty revenues of the federal
government. Provincial, local, and Indigenous governments do not levy tariffs on international trade
transactions, which are a strictly federal jurisdiction. But most provincial and some Indigenous
governments levy taxes on consumption goods, of which imports are a part. Trade agreements may
increase the total amount of taxable consumption spending and, therefore, may increase the
revenues of these governments.
, 6. Analyze the recent trends in the Canadian government expenditures using following data
Answer: Real per capita spending has increased from less than $21,000 to over $30,000 over this period.
Even excluding the COVID-related increase in spending in 2020, real per capita spending was over $25,000
in 2019. This indicates that total expenditures have increased at a faster rate. The size of government has
increased in terms of its real per capita size. The size of government relative to the overall economy—the
fiscal burden of government, one could say — decreased from over 47 percent in 1990 to just over 40
percent in 2019. The increase to over 52 percent of GDP in 2020 is largely accounted by COVID-related
emergency measures; excluding that year, the share of overall economic activity accounted for by
government has declined.
7. What is Public Economics? What taxes are exclusively the domain of provincial and local
governments, and the federal government does not receive any revenue from this source?
Answer: Public Economics develops principles for understanding the government's taxing and
spending activities. Property taxes are exclusively the domain of provincial and local governments,
and the federal government does not receive any revenue from this source.
8. Which factors do economists take into account in evaluating changes in the growth of government?
Answer: Population growth, size of the economy, and inflation are the factors economists take
into account in evaluating changes in the growth of government.
9. Which factor has become an increasingly large portion of total government spending in Canada in
recent years?
Answer: Health care has become an increasingly large portion of total government spending, due in
part to an aging population.
