Saturday Quiz – April 5, 2014

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 #263

• 1. Recent press reports indicate that the European Central Bank is considering introducing quantitative easing to ease the aggregate demand losses associated with the implementation of fiscal austerity programs as deflation threatens. If calibrated correctly, this strategy will replace the net financial assets destroyed by the fiscal austerity.
• False
• True
• 2. The expansionary impact of deficit spending on aggregate demand is lower when the government matches the deficit with debt-issuance than if it just instructed the central bank to fund its spending account. This is because debt-issuance drains excess reserves resulting from the deficits and purchasing power is accordingly withdrawn from the monetary system.
• False
• True
• 3. Imagine that the government is choosing between a tax cut that will reduce tax revenue at the current level of national income by $x and a spending increase of $x. Which policy option will have the greater initial impact on aggregate demand?
• Tax cut
• Spending increase
• Both will be equivalent
• There is not enough information to answer this question

Sorry, quiz 263 is now closed.

You can find the answers and discussion here