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The Weekend Quiz – June 9-10, 2018

Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blogs I post. See how you go with the following questions. Your results are only known to you and no records are retained.

Quiz #481

  • 1. Real wages growth has been non-existent or low in many advanced nations in recent years. However, if workers succeed in gaining real wages increases then this will squeeze the share of profits in national income.
    • False
    • True
  • 2. The government has to issue debt to match an on-going fiscal deficit if the central bank is targetting, say a 2 per cent short-term interest rate and declines to pay a return on excess bank reserves.
    • False
    • True
  • 3. Suppose that the government announced it intended to cut its deficit from 4 per cent of GDP to 2 per cent in the coming year and during that year net exports plus net income flows were projected to move from a deficit of 1 per cent of GDP to a surplus of 1 per cent of GDP. If private sector deleveraging resulted in it spending less than it earned to the measure of 5 per cent of GDP, then the fiscal austerity plans will undermine growth even if the net export surplus was realised.
    • False
    • True

Sorry, quiz 481 is now closed.

You can find the answers and discussion here

This Post Has 4 Comments

  1. I am interested to see Bill’s answer to 2 tomorrow – I can see why some bond buying and/or selling will be needed to hit an IR target without IOR – but can’t see why that means the government has to issue debt to MATCH an on-going fiscal deficit.

  2. @Rob

    Exactly my thought. Surely the necessary level of debt-issuance is mediated by changes in the desire for government bonds, which was not posited as being constant.

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