The Weekend Quiz – March 28-29, 2020

Welcome to The Weekend Quiz. 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 #575

• 1. Only one of the following propositions is possible (with all balances expressed as a per cent of GDP):
• None of the above are possible as they all defy the sectoral balances accounting identity.
• A nation can run an external deficit with a fiscal surplus that is larger, while the private domestic sector is spending less than they are earning.
• A nation can run an external deficit with an offsetting fiscal surplus, while the private domestic sector is spending more than they are earning.
• A nation can run an external deficit with an offsetting fiscal surplus, while the private domestic sector is spending less than they are earning.
• 2. It won't be long before the European Commission demands that Eurozone nations are forced to pursue internal devaluation through austerity programs that are designed to deflate nominal wages and prices to allegedly improve their relative competitiveness. Ignoring whether the logic is correct or not, which of the following propositions must also follow within the internal devaluation logic:
• If wages and prices fall at the same rate, then labour productivity has to rise and what happens to employment is irrelevant.
• If wages and prices fall at the same rate, then labour productivity has to rise and employment must grow.
• If wages and prices fall at the same rate, then labour productivity has to rise and employment remain constant or grow.
• None of the above
• 3. One possible problem with running continuous fiscal deficits is that the spending builds up over time and with inflation eventually becoming the risk that has to be managed.
• False
• True

Sorry, quiz 575 is now closed.

You can find the answers and discussion here