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 – June 25-26, 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 #379
- 1. The more public debt a sovereign government voluntarily issues to match its fiscal deficits:
- the less is the volume of investment funds in the non-government sector that can be used for other investments.
- the greater is non-government wealth held in the form of public debt.
- the more difficult it is for banks to attract deposits to initiate loans from.
- 2. When an external deficit and public deficit coincide, there must be a private sector deficit, which means that governments can only really run fiscal deficits safely to support a private sector surplus, when net exports are strong.
- False
- True
- 3. In a standard fixed coupon government bond auction, the higher is the demand for the bonds:
- the lower will be the yields on the issued bond, which tells us nothing about the effect of fiscal deficits on short-term interest rates.
- the lower will be the yields on the issued bond, suggesting that higher fiscal deficits drive short-term interest rates down.
- the higher will be the yields on the issued bond, suggesting higher fiscal deficits drive short-term interest rates down.
Sorry, quiz 379 is now closed.
You can find the answers and discussion here
A short question for Bill
I did well on the quiz but do not understand the mechanism whereby the pound falls dramatically due to the decision of people in the UK to leave the EU. Can you explain what is going on?
I just heard the ex Goldman Sachs Bank of England governor, Mark Carney make a speech on the BBC News stating that he will capitalise the banks so that they can lend to businesses. The interviewer seemed incredulous Dimbleby said “can you do that?” The currency issuing powers of government exposed, but the credit creation of banks ignored, so that people believe that they lend government money.
It is funny how a glimpse of the truth about money creation comes to light and the unaware are just incredulous and then forget it.
Soon I will hear, I expect, George Osborne saying that government must make more cuts to public spending because of the crisis with the pound. They make so much capital out of the ignorance of people.
For once an easy quiz 🙂
@Sandra Crawford
Probably the uncertainty factor, they flee to the safe haven the dollar a real “fiat-currency” that can be created in unlimited amount and Fed have proved they will if necessary. In EUrope they are so infested with neoliberal fantasies that there is a real political risk they would “run out” of money.
All European currencies did take a dive even if not as deep as GBP.
They say the GBP dive was historical but the dive from July to November 2008 was much larger in percent and nominal. From $2.0022 to $1.4638 (-27%) and $1.3735 January 2008.
But the most appalling is the reaction off the left in Europe. It’s like a devastating natural disaster have hit Europe. Blue collar class and underprivileged people did use the ballot box democracy to beat the elite and the “educated” privileged middle class. Most of the elite left is appalled by the “stupidity” of the precariat underclass.
@Sandra Crawford
The important thing to keep in mind is that day-to-day financial asset prices are like odds at the race track: they represent nothing more or less than a summary of bets people have placed. So why do people place particular bets? At first order, because of dodgy modelers, at second order, because of soothsayers (“technical traders”), and at third, because of bandwagoners.
The longer-term mechanism that drives exchange rates is trade balance (external surplus/deficit), but there definitely wasn’t a meteoric shift in the trade balance between yesterday and today, so for the time being gambling is the only really plausible answer.
On another note, hopefully if this spreads to the rest of Europe the news buzzwords will be more clever. I’m throwing my hat in for “Departugal” and “Czechout.”
Bill,
I see Ken Rogoff is describing the result of the UK’s EU Referendum as “Britain’s democratic failure”. He arbitrarily decides that a majority of 60% should be required in the referendum plus a majority of 60% in the commons. Why did he not say this before the referendum?
Kind Regards
3/3 Yes. I finally did it!
The more I understand the more I realise how neoliberal the left are.
I could see economics didn’t make sense but mmt has finally given me a mathematical understanding.
I’m sick of reading economically illiterate articles. This article doesn’t even get Keynesian theory governments need to make up for the fluctuations in private demand to maintain full employment.
http://www.abc.net.au/news/2016-06-26/labor-pledges-budget-balance-despite-$16.4b-deeper-deficit/7544780