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 – October 25, 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 #292
- 1. Conservatives have criticised several governments (such as in France and Italy) for not pursuing fiscal austerity programs with sufficient commitment. The fact that these government fiscal deficits continue to increase is evidence of this lack of commitment.
- False
- True
- 2. 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:
- Fiscal deficit
- Fiscal surplus
- Cannot determine because we would need to know the scale of the private domestic sector saving as a % of GDP.
- 3. The net worth of the non government sector rises if the government issues bonds to match its deficit spending.
- False
- True
Sorry, quiz 292 is now closed.
You can find the answers and discussion here
Wait, shouldn’t question 3 be true? Isn’t owning government-issued debt the same as owning currency?
I assumed that was supposed to mean as opposed to when the government doesn’t match its spending with bonds.
Well I uh, think the question assumes a simple model where the private sector surplus (%2 of GDP) is “spent” purchasing those bonds. So Jon is right, however the result is… still False because the private sector has merely converted one certificate (“paper money”) for another (“bond”).