Saturday Quiz – April 11, 2009

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 five questions. Your results are only known to you and no records are retained.

Quiz #4

  • If the unemployment rate is rising it means
    • that there are more people without jobs than in the previous period.
    • as a percentage of the available labour force more people are without jobs.
    • that there are fewer jobs available than in the previous period.
  • The comment that budget deficits lead to higher taxation is
    • generally false because in the case of sovereign governments because they do not need to raise taxes to finance spending.
    • generally true because revenue has to be raised ultimately to pay for the deficit spending and that requires individual tax burdens to rise.
    • generally true if the deficit stimulates output but doesn't mean current individual tax burdens are higher.
  • Even though a sovereign government doesn't have to "finance" its spending, if it issues debt to the private sector
    • it will push up interest rates because there is only a finite amount of savings available at any time to buy the bonds.
    • it will not push up interest rates because budget deficits put downward pressure on rates and bond sales just maintain them at their previous rate.
    • it will push up interest rates if the government makes a decision that they should be higher either through direct central bank intervention or through voluntary debt issuing arrangements that allow this.
  • When the government borrows from the non-government sector it eventually has to pay the bonds back on maturity. This will
    • be inflationary if the government payments to bond holders at maturity add more to nominal aggregate demand than the real economy can support given other policy settings.
    • be inflationary if by the time the bonds mature the economy is growing strongly so there will be too much money floating about.
    • not be inflationary because the sovereign government just has to credit the bank accounts of those who hold the bonds to repay them.
  • Introducing more sophisticated training programs for unemployed workers during a recession
    • is an ineffective strategy because it doesn't take into account employer prejudices.
    • is an ineffective strategy because even if it increases individual productivity it just shuffles the jobless queue.
    • is an effective strategy because the workers become more productive and are hence more attractive to employers.

Sorry, quiz 4 is now closed.

scroll down to find the answers and explanation below.

Quiz #4 answers

This Post Has 3 Comments

  1. Hi,
    My names Wozza. I was driving a truck but now I’m unemployed. If it wasent 4 this bloody recession I would still have my job. The wife is workin so we still have a bit of money. At least this quiz gives me somthin to do in my spear time. I findin that the questions are a bit differen’t then I though they would. Thinkin maybe I should start uni and do Economics and then I was will be able to do them a bit easier. \

    Have a good one,


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