Quiz #171 answers

• 1. If the share in national income that workers receive (the wage share) falls then their real standard of living is reduced.

Answer: False

• 2. If workers succeed in gaining real wages increases then, other things equal, the share of profits in national income is squeezed.

Answer: False

• 3. Modern Monetary Theory (MMT) does not deny that government spending can crowd out private spending.

Answer: True

• 4. The government has to issue debt if the central bank is targetting, say a 2 per cent short-term interest rate and declines to pay a return on excess bank reserves.

Answer: True

• 5. Premium Question: Suppose that the government announced it intended to cut its deficit from 4 per cent of GDP to 2 per cent in the coming year and during that year net exports were projected to move from a deficit of 1 per cent of GDP to a surplus of 1 per cent of GDP. If private sector deleveraging resulted in it spending less than it earned to the measure of 5 per cent of GDP, then the fiscal austerity plans will undermine growth even if the net export surplus was realised.

Answer: True