Quiz #102

• 1. The US federal government can run a balanced budget over the business cycle (peak to peak) as long as it accepts that after all the spending adjustments are exhausted that the private domestic balance will only be in surplus if the external balance is in surplus.
• False
• True
• 2. A basic understanding of Modern Monetary Theory (MMT) would leave you to conclude that excessive real wage demands by workers can cause unemployment.
• False
• True
• 3. Modern Monetary Theory (MMT) teaches us that a sovereign government does not have to issue debt to finance its spending. But the more public debt it voluntarily issues:
• the less is the volume of investment funds in the non-government sector that can be used for other investments.
• the greater is non-government wealth held in the form of public debt.
• the more difficult it is for banks to attract deposits to initiate loans from.
• 4. A budget surplus indicates that the national government is
• you cannot conclude anything about the government's policy intentions.
• trying to reduce public debt
• trying to slow the economy down and contain inflation.
• 5. Premium Question: The Australian government is aiming to get real GDP growth back on the trend that was observed over the last decade - around 3 per cent per annum. If labour productivity grows at 1.5 per cent per annum and the labour force grows at 2 per cent per annum and the average working week is constant in hours, then this policy (if successful) will see the unemployment rate rising.
• False
• True