Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern…
Saturday Quiz – February 11, 2012
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 questions. Your results are only known to you and no records are retained.
Quiz #151
- 1. Bank lending moved from being reserve-constrained to capital-constrained once the prudential authorities relaxed reserve ratio requirements and the Bank of International Settlements introduced the Basel framework for capital adequacy.
- False
- True
- 2. In an endogenous money system a central bank cannot simultaneously reduce bank lending and maintain a given positive target interest rate by increasing the rate that it provides reserves on demand to the commercial banks.
- False
- True
- 3. In the context of population ageing, the fact that a sovereign government is never financially constrained means that it will always be able to provide first-class health care.
- False
- True
- 4. By increasing tax rates a sovereign government increases its capacity to spend more without increasing inflation.
- False
- True
- 5. Premium Question: For a nation running a small current account deficit, the government budget will always be in deficit if the domestic private sector is spending less than it earns.
- False
- True
Sorry, quiz 151 is now closed.
You can find the answers and discussion here
Learning lots and thanks for all the discussion on MMT – would like to have you educate some of our Federal Government on your ideas except they are mostly lawyers – go figure a bunch of lawyers trying to make sense of Economics!
Couldn’t do worse than the economists Chris. At least the lawyers don’t come to the party with their heads stuffed full of ideological nonsense, like QTM etc. They might be educable.
4/5! Out of luck – I totally didn’t get the first two questions, yet it was the 4th one I got wrong.
@Chris
I sometimes think it’s best. In Law School they don’t teach micro-economics, so that saves from quite a few fallacies from macro-economics built on a micro perspective.
Gee, 4 out of 5 – wrong on question 5 – soon I will be almost like half an economist!
Damn would have got 4/5 if I had read Q2 correctly, but I disagree with the answer to Q4. Yes, it does not necessarily lead to an increase in the money supply but it will increase the velocity of money because people save whereas the government does not.
5th question left me wondering. I can’t get it.
Great stuff, as usual! I think that my compatriot Chris, has it right regarding lawyers. To my mind, lawyers are the one profession that bucks the trend of non-economists assimilating MMT more easily. This is because there is a natural kinship between the mindset of lawyers and that of rational expectations theorists — the same determination to proscribe winners and losers, the same very lawyerly concern about maintaining “appearances” (almost like adherents of gold standard ideology), the same determination to make debtors pay and “creditor/rentiers” benefit, the same hypocritical view of crime and punishment, the same determination to defend the status quo (the powerful) by promoting societal acquiescence to artificial constraints on social action, plus an unparallelled dependence on these same elites for their incomes.
Not all lawyers are without ideological nonsense. Many see the whole political/financial/legal system as for rentiers. For instance check this http://www.allenovery.com/AOWeb/binaries/64483.PDF