Saturday Quiz – January 31, 2015

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 #306

  • 1. Although we know that a country is running a small current account deficit and that the private domestic sector is saving overall, we are unable to draw any conclusions about the state of the fiscal balance until we know the relative magnitudes of the other balances.
    • False
    • True
  • 2. A currency-issuing government does not have to issue bonds to match its deficit spending. One of the problems of issuing debt to the non-government sector, as opposed to funding the spending via central bank credit, is that it is a form of corporate welfare because it boosts private wealth.
    • False
    • True
  • 3. A rising fiscal surplus, which means the government is increasingly withdrawing more purchasing power from the economy than it is adding, signals that discretionary fiscal policy is contractionary (aiming to reduce total economic activity).
    • False
    • True

Sorry, quiz 306 is now closed.

You can find the answers and discussion here

This Post Has 4 Comments

  1. I am puzzled about the quiz results for questions #2 and #3

    To question # I answered “True”. I do consider issuing debt to the private sector to be a way of boosting their wealth. It appears that the correct answer is “False”. I am confused here.

    To question #3 “A rising fiscal surplus, which means the government is increasingly withdrawing more purchasing power from the economy than it is adding, signals that discretionary fiscal policy is contractionary (aiming to reduce total economic activity).” I answered that the statement was “True”. I appears that the correct answer is “False”. I would have assumed that a fiscal surplus is contractionary; unless a trade deficit more than offsetting the Government’s contractionary policy is financing total economic activity. Is this the reason why the statement is False?

  2. @Stuart
    If I’m not mistaken the issue with #2 lies in this detail: “One of the problems of issuing debt to the non-government sector, as opposed to funding the spending via central bank credit …”

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