Quiz #140 answers

• 1. Assume that the current account deficit of a nation is on average over the business cycle equal to 2 per cent of GDP and that the government manages to run a balanced budget when averaged over the same cycle. We can conclude that on average the private domestic sector overall is spending more than it is earning.

Answer: True

• 2. Trade unions can cause mass unemployment by forcing firms to accede to wage demands that outstrip the inflation rate.

Answer: True

• 3. Trade unions that manage to push aggregate wages growth ahead of the inflation rate will ensure that workers gain a greater share of national income.

Answer: False

• 4. Sovereign government spending becomes more expensive when government bond yields for new issues rise.

Answer: False

• 5. Premium Question: If labour productivity is growing at 2 per cent per annum and the labour force is growing at 1.5 per cent per annum and the average working week is constant in hours, then real GDP growth must be greater than 3.5 per cent per annum or unemployment will rise.

Answer: False