Saturday Quiz – February 16, 2013

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 #204

• 1. Unlike a household which not only has to service its debt obligations over the course of the loan but also has to repay them at the due date, a national government debt, which issues its own currency can always roll over its "own currency" debt obligations and never has to pay them back.
• False
• True
• 2. Standing facilities that central banks maintain means that the monetary base always adjusts to the changes in the money supply.
• False
• True
• 3. Assume that the current account deficit of a nation is stable and equal to 2 per cent of GDP throughout a complete business cycle. The government is imposing fiscal austerity and at a particular point over that cycle we observe a government surplus equal to 3 per cent of GDP but which over the complete business cycle will end up being balanced. We also would know two things about the private domestic sector balance - at the observation point and on average over the cycle. It would be in:
• (d) deficit by 1 per cent of GDP but on average over the cycle in deficit equal to 2 per cent of GDP.
• (c) deficit by 1 per cent of GDP but on average over the cycle in surplus equal to 2 per cent of GDP.
• (b) deficit by 5 per cent of GDP but on average over the cycle in deficit equal to 2 per cent of GDP.
• (a) deficit by 5 per cent of GDP but on average over the cycle in surplus equal to 2 per cent of GDP.

Sorry, quiz 204 is now closed.

You can find the answers and discussion here