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…
The Weekend Quiz – January 23, 2016
Welcome to The Weekend Quiz, which used to be known as the 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 #357
- 1. Many progressive commentators believe that bank lending should be more closely regulated to ensure that all bank loans were backed by reserves held at the bank. However, this would unnecessarily reduce the capacity of the banks to lend.
- True
- False
- 2. Assume a nation is running an external surplus equivalent to 2 per cent of GDP and the private domestic sector is currently saving overall 1 per cent of GDP. In this situation, the government must be running:
- A fiscal surplus equal to 3 per cent of GDP.
- A fiscal deficit equal to 3 per cent of GDP.
- A fiscal surplus equal to 1 per cent of GDP.
- A fiscal deficit equal to 1 per cent of GDP.
- 3. Start from a situation where the external surplus is the equivalent of 2 per cent of GDP and the fiscal surplus is 2 per cent of GDP. If the fiscal balance stays constant as a percent of GDP and the external surplus rises to the equivalent of 4 per cent of GDP then:
- National income rises and the private domestic surplus moves from 4 per cent of GDP to 6 per cent of GDP.
- National income remains unchanged and the private domestic surplus moves from 4 per cent of GDP to 6 per cent of GDP.
- National income falls and the private domestic surplus moves from 4 per cent of GDP to 6 per cent of GDP.
- National income rises and the private domestic surplus moves from 0 per cent of GDP to 2 per cent of GDP.
- National income remains unchanged and the private domestic surplus moves from 0 per cent of GDP to 2 per cent of GDP
- National income falls and the private domestic surplus moves from 0 per cent of GDP to 2 per cent of GDP.
Sorry, quiz 357 is now closed.
You can find the answers and discussion here
3 from 3
For those of you who like Heiner Flassbeck but can’t read German, he now has an English-language website. It is http://www.flassbeck-economics.com .
2/3 this time-drat! I think I know what scuppers me on these sectoral balance questions : it’s the confusion of polarities, that is, ‘deficit’ creates the intuition of a ‘-‘ sign an surplus a ‘+’ sign. Must pay more attention to Bill’s advisory note:
“To aid interpretation remember that (I-S) > 0 means that the private domestic sector is spending more than they are earning; that (G-T) G; and (X-M) < 0 means the external position is in deficit because imports are greater than exports."
So:
private domestic sector deficit = positive number
Government sector surplus = negative number
External sector deficit is '-' and surplus '+'
so without some practise it's easy to blunder-will do better next time!