Quiz #104 answers

• 1. The Quantity Theory of Money considers that growth in the stock of money will be inflationary. The fact that the large-scale quantitative easing (so-called printing money) in many nations in recent years has not generated inflation demonstrates that the mainstream Quantity Theory of Money is incorrect.

Answer: False

• 2. Governments pursuing fiscal austerity desire to reduce their public debt ratios. While that desire is ill-founded the strategy will achieve that end but at the cost of higher unemployment.

Answer: False

• 3. The Confederate government in 1861 could have eased the inflationary impact of its war spending by issuing more bonds than it did.

Answer: False

• 4. A recent Bloomberg report on the British economy says that "the government has staked its reputation on eliminating the budget deficit ... by the time of the next election in 2015". The current deficit to GDP ratio is around 10 per cent. The declining deficit to GDP ratio will signal the discretionary contraction in net public spending.

Answer: False

• 5. Premium Question: When net exports are negative, government deficits will be required if the private domestic sector is to save overall.

Answer: True