The Weekend Quiz – October 22-23, 2022

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.

These were the Quiz questions for the second week of my edx MOOC – Modern Monetary Theory: Economics for the 21st Century – that finished recently.

I promised students that I would provide answers and analysis for them after the course finished.

Quiz #630

• 1. The reason that MMT economists favour flexible exchange rates over the Bretton Woods system of fixed exchange rates is because:
• (a) Fiscal and monetary policy tools can target domestic policy outcomes and not be compromised by having to defend a particular exchange rate as was the case under Bretton Woods system.
• (b) Taxes are not required to fund government spending.
• (c) Government debt is able to be paid back more easily.
• (d) Currency speculation is reduced.
• 2. The lesson that the Pompeii story taught us was that:
• (a) The old coins used in Pompeii were able to buy goods and services.
• (b) The government had to spend first before it could collect taxes.
• (c) The once thriving city was destroyed by a volcanic eruption.
• (d) Some people worked in the non-government sector.
• 3. If the expenditure multiplier is estimated to be 1.5, then if the government expands its spending by $100 billion, we expect GDP to rise by
• (a) $1500 billion.
• (b) $1.5 billion.
• (c) $150 billion.
• (d) $100 billion less 1.5 times $100 billion.
• 4. The expenditure multiplier will be largest in which case:
• (a) Households consume 70 cents of every extra dollar in disposable income received.
• (b) Households consume 80 cents of every extra dollar in disposable income received.
• (c) Households save 20 cents of every extra dollar in disposable income received.
• (d) Households save 10 cents of every extra dollar in disposable income received.
• 5. If you observed the following conditions, which would be consistent with a stable GDP level?
• (a) The government deficit is $10 (spending greater than tax revenue), household saving is $20, Import expenditure is $20, total investment expenditure is $20 and export sales equal $10. The unemployment rate is 10 per cent.
• (b) The government deficit is $15 (spending greater than tax revenue), household saving is $20, Import expenditure is $20, total investment expenditure is $15 and export sales equal $15. The unemployment rate is 5 per cent.
• (c) The government deficit is $10 (spending greater than tax revenue), household saving is $15, Import expenditure is $20, total investment expenditure is $10 and export sales equal $10. The unemployment rate is 12 per cent.
• (d) The government deficit is $10 (spending greater than tax revenue), household saving is $20, Import expenditure is $20, total investment expenditure is $20 and export sales equal $15. The unemployment rate is 10 per cent.

Sorry, quiz 630 is now closed.

You can find the answers and discussion here