Quiz #150 answers

• 1. The distribution of national income has shifted in most advanced nations over the last two decades in favour of profits. This trend will only stabilise if workers can secure wage increases in line with the growth of labour productivity.

Answer: False

• 2. The ratio of the broad measure of the money supply (M2) to the monetary base has fallen dramatically in the US in recent years. This tells us that the mainstream macroeconomics concept of the money multiplier is false.

Answer: False

• 3. The real spending capacity of a currency-issuing government is constrained by the tax revenue it generates.

Answer: True

• 4. In its latest World Economic Outlook Update (issued January 2012), the IMF said that "countries should let automatic stabilizers operate freely for as long as they can readily finance higher deficits". In general, the IMF estimates of these automatic stabilisers are biased upwards.

Answer: False

• 5. Premium Question: Under current public sector debt-issuance arrangements (where sovereign governments match their deficits with issues of debt), the government and the private domestic sectors can simultaneously reduce their debt levels.

Answer: True