Saturday Quiz – June 25, 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 #118

• 1. Assume that a nation is continuously running an external deficit of 2 per cent of GDP. In this economy, if the private domestic sector successfully saves overall, we would find:
• A budget deficit
• A budget surplus
• Cannot determine because we would need to know the scale of the private domestic sector saving as a % of GDP.
• 2. Public bonds constitute private wealth. Accordingly, private net worth rises if the government issues bonds to match its deficit spending.
• False
• True
• 3. A central bank would not be able to directly purchase Treasury debt to facilitate a national government's budget deficit while still targeting a non-zero policy rate.
• False
• True
• 4. While budget deficits rise due to the operation of the automatic stabilisers, as growth resumes, the automatic stabilisers work in a counter-cyclical fashion to ensure that the government budget balance returns to its appropriate level.
• False
• True
• 5: Premium Question: A government wanting to reduce their unemployment rates after a deep recession should use expansionary fiscal policy to ensure real GDP growth gets back on trend.
• False
• True

Sorry, quiz 118 is now closed.

You can find the answers and discussion here