Quiz #169

• 1. If austerity led to all national governments simultaneously running public surpluses (which is the aim) then it would be impossible for all their respective private domestic sectors to spend less than they earn.
• False
• True
• 2. When the government matches its deficit with debt-issuance which drains private sector purchasing power this is equivalent to a leakage from the expenditure system (akin to taxation, saving or imports) which reduces the expansionary impact of the government deficit spending.
• False
• True
• 3. National income would rise each year even if the workers, as part of a employment guarantee program, were engaged to dig large holes and fill them in again on a daily basis.
• False
• True
• 4. Which budget deficit outcome is the least expansionary?
• (a) 1 per cent of GDP
• (b) 2 per cent of GDP
• (c) 3 per cent of GDP
• (d) Cannot say, it depends on the decomposition of the structural and cyclical components.
• 5. Premium Question: If the government reduces its net spending by say $10 billion, the net financial assets destroyed by this fiscal withdrawal could be replaced by the central bank engaging in a $10 billion quantitative easing program.
• False
• True

Quiz #169 answers

• 1. If austerity led to all national governments simultaneously running public surpluses (which is the aim) then it would be impossible for all their respective private domestic sectors to spend less than they earn.

Answer: True

• 2. When the government matches its deficit with debt-issuance which drains private sector purchasing power this is equivalent to a leakage from the expenditure system (akin to taxation, saving or imports) which reduces the expansionary impact of the government deficit spending.

Answer: False

• 3. National income would rise each year even if the workers, as part of a employment guarantee program, were engaged to dig large holes and fill them in again on a daily basis.

Answer: True

• 4. Which budget deficit outcome is the least expansionary?

Answer: (a) 1 per cent of GDP

• 5. Premium Question: If the government reduces its net spending by say $10 billion, the net financial assets destroyed by this fiscal withdrawal could be replaced by the central bank engaging in a $10 billion quantitative easing program.

Answer: False