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. Assuming the expenditure multiplier is greater than 1, if the government increases its deficit they will have a greatest immediate impact on aggregate demand if there are no offsetting monetary operations by the central bank (government bond sales) draining the excess reserves created.
- 2. If the government achieves in reducing its fiscal deficit by say $10 billion, the net financial assets destroyed by this withdrawal could be replaced by the central bank engaging in a $10 billion quantitative easing program.
- 3. Which government deficit outcome is the most expansionary?
- 1 per cent of GDP.
- 2 per cent of GDP.
- 3 per cent of GDP.
- Cannot tell because it depends on the decomposition of the structural and cyclical components.
Sorry, quiz 703 is now closed.
You can find the answers and discussion here