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…
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.
- 1. If the external sector overall is in deficit, it is still possible for the private domestic sector and government sector to run surpluses and each pay down its debt as long as GDP growth is fast enough (the technical condition is that the rate of GDP growth has to be faster than the real interest rate).
- 2. National government debt (where there is currency sovereignty) is not really a liability because the government can just roll it over continuously and thus they never have to pay it back. This is different to a household, which not only has to service its debt but also has to repay them at the due date.
- 3. Even though the money multiplier found in macroeconomics textbooks is a flawed description of the way the monetary system operates, having some positive minimum reserve requirements does constrain credit creation activities of the private banks more than if you have no requirements other than the rule that balances have to be non-zero.
Sorry, quiz 689 is now closed.
You can find the answers and discussion here