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 – October 20-21, 2018
Welcome to The Weekend Quiz. This week’s quiz is the 500th edition. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.
Quiz #500
- 1. The mainstream the Quantity Theory of Money claims that growth in the stock of money will be inflationary. The fact that the recent practice of large-scale quantitative easing (so-called printing money) in many nations has not generated any inflationary impulses is evidence that this 'Theory' is flawed.
- False
- True
- 2. Bank lending is capital-constrained rather than reserve constrained. If the central bank forced banks to maintain a reserve ratio of 100 per cent then lending would also be reserve constrained.
- False
- True
- 3. The fact that a sovereign government is never financially constrained means that they can always provide first-class health care even with rising dependency ratios associated with population ageing.
- False
- True
Sorry, quiz 500 is now closed.
You can find the answers and discussion here
Three out of three! I must be getting better, or better at sussing Bill’s cunning mind!
Top marks, though to be honest I’m not completely sure why. 3 yes, but for the others I look forward to the technical explanation.
2 of 3, the first one it’s not clear to me.
@Matt R: I think the second one it’s about how the causality of banks getting reserves is the opposite of what we hear from the mainstream economists.
Bank lend the money and after that they search for the required reserves.
If reserves are not available in the inter-bank market, the Central Bank have to cover for it, otherwise, the new demand in the inter-bank market, would increase the interest rate target that the central bank is trying to control.
So, never mind the reserves requirements, banks can always find the necessary reserves.
Of course, take my knowledge with a grain of salt, you should check Bill answer.
Hi there
“The fact that a sovereign government is never financially constrained means that they can always provide first-class health care even with rising dependency ratios associated with population ageing”
If 65% of the populace is in the retirement window or near it, they are generally not productive. You can print money but you can’t print working age citizens. Someone has to do the work
Three out of three
An increase in the money supply will be inflationary if we’re at full employment but we’re not
Fiat money means reserves are just accounting entries in a ledger and constrain nothing
You can’t deliver first class healthcare if the resources needed to do it aren’t available
Off topic I know —
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Is it possible that the euro-zone could let every nation have its own currency so they can use MMT to their advantage, and still get the benefits of a common currency —
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if the ECB created a euro-zone wide system of currency exchange at a very minimum rate skimmed off to pay for it. None of this charge you as you cross into Germany and then charge you again when you go home or go on to the next nation as you travel?
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