Saturday Quiz – May 9, 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 #320

1. When the government matches a deficit by issuing debt to the private sector this is equivalent to a leakage from the expenditure system (akin to taxation, saving or imports) which reduces the expansionary impact of the government deficit spending.

False
True

2. Which fiscal deficit outcome is the least expansionary?

1 per cent of GDP
2 per cent of GDP
3 per cent of GDP
Cannot say, it depends on the decomposition of the structural and cyclical components.

3. If the government reduces its net spending by say $10 billion, the net financial assets destroyed by this fiscal withdrawal could be replaced by the central bank engaging in a $10 billion quantitative easing program.