Saturday Quiz – September 12, 2009

Welcome to the billy blog Saturday quiz. The quiz tests whether you have been paying attention over the last seven days.

See how you go with the following five questions. Your results are only known to you and no records are retained.

Quiz #25

• 1. A stock-flow consistent macroeconomic framework shows categorically that as long as net government spending grows in line with GDP, inflation will not be a problem.
• False
• True
• 2. A rising federal budget deficit indicates the stock of net government spending at that level is also rising to support private saving.
• False
• True
• 3. When an external deficit (X M < 0) and public deficit (G - T > 0) coincide, there must be a private sector deficit, which means that governments can only really run budget deficits safely to support a private sector surplus, when net exports are strong.
• False
• True
• 4. If an individual repays a bank loan in dollar bills instead of with a cheque, this transaction will not destroy the financial assets created when the loan was made because a bank will never destroy that cash. So not all transactions between non-government entities net to zero.
• False
• True
• 5. The Austrian School is correct in one way that we should acknowledge. If there is a lack of desire to save among households then investors will find it difficult to get funds at reasonable prices to build productive capacity.
• False
• True

Sorry, quiz 25 is now closed.

scroll down to find the answers and explanation below.

Quiz #25 answers

• 1. A stock-flow consistent macroeconomic framework shows categorically that as long as net government spending grows in line with GDP, inflation will not be a problem.

Answer: False

Explanation: You might like to review Stock-flow consistent macro models for further information or post a comment.

• 2. A rising federal budget deficit indicates the stock of net government spending at that level is also rising to support private saving.

Answer: False

Explanation: You might like to review Stock-flow consistent macro models for further information or post a comment.

• 3. When an external deficit (X M < 0) and public deficit (G - T > 0) coincide, there must be a private sector deficit, which means that governments can only really run budget deficits safely to support a private sector surplus, when net exports are strong.

Answer: False

Explanation: You might like to review Stock-flow consistent macro models for further information or post a comment.

• 4. If an individual repays a bank loan in dollar bills instead of with a cheque, this transaction will not destroy the financial assets created when the loan was made because a bank will never destroy that cash. So not all transactions between non-government entities net to zero.

Answer: False

Explanation: You might like to review Stock-flow consistent macro models for further information or post a comment.

• 5. The Austrian School is correct in one way that we should acknowledge. If there is a lack of desire to save among households then investors will find it difficult to get funds at reasonable prices to build productive capacity.

Answer: False

Explanation: You might like to review Retail sales a story within a story for further information or post a comment.