Saturday Quiz – January 29, 2011

Welcome to the billy blog Saturday quiz. The quiz tests whether you have been paying attention over the last seven days. See how you go with the following six questions. Your results are only known to you and no records are retained.

Quiz #97

• 1. A fact that is overlooked by those promoting austerity programs, is that when economic growth resumes, the automatic stabilisers work in a counter-cyclical fashion to ensure that the government budget balance returns to its appropriate level.
• True
• False
• 2. From a monetary perspective, it would be impossible for a central bank to directly purchase Treasury debt to facilitate a national government's budget deficit while still targeting a non-zero policy rate.
• True
• False
• 3. When a sovereign government issues debt it logically:
• increases the assets that are held by the non-government sector $-for-$.
• has no impact on the overall holdings of assets held by the non-government sector $-for-$
• reduces the capacity of the private sector to borrow from banks because they use their deposits to buy the bonds.
• 4. Rising government bond yields for new issues indicate:
• (a) that government spending is becoming more expensive.
• (b) that economic growth is reducing private risk assessments of alternative financial investments.
• (c) that government spending is increasing the cost of borrowing for private investors.
• (d) that private investors consider public debt to be riskier
• (e) Answers (a) and (d) depending on the situation.
• (f) Answers (b) and (d) depending on the situation.
• 5. Premium question: If private households and firms decide to lift their saving ratio the national government has to increase its net spending (deficit) to fill the spending gap or else economic activity will slow down.
• False
• True

Sorry, quiz 97 is now closed.

You can find the answers and discussion here