Quiz #219

• 1. The National Accounting framework says that total spending is the sum of household consumption, private investment, government spending and net exports. To understand this in terms of a stock-flow consistent macroeconomics, where we have to always trace the impact of flows during a period on the relevant stocks at the end of the period, we would interpret the spending components as flows adding to the stock of aggregate demand which in turn impacts on the final production (Gross Domestic Product).
• False
• True
• 2. The imposition of positive minimum reserve requirements on the private banks by the central bank, will have no constraining influence on the credit creation activities of the private banks relative to a system where there are no requirements other than the rule that reserve balances have to be positive.
• False
• True
• 3. If the external sector is in deficit overall and GDP growth rate is faster than the real interest rate, then:
• Both the private domestic sector and the government sector overall can pay down their respective debt liabilities.
• Either the private domestic sector or the government sector overall can pay down their debt liabilities.
• Neither the private domestic sector or the government sector overall can pay down their debt liabilities.

Quiz #219 answers

• 1. The National Accounting framework says that total spending is the sum of household consumption, private investment, government spending and net exports. To understand this in terms of a stock-flow consistent macroeconomics, where we have to always trace the impact of flows during a period on the relevant stocks at the end of the period, we would interpret the spending components as flows adding to the stock of aggregate demand which in turn impacts on the final production (Gross Domestic Product).

Answer: False

• 2. The imposition of positive minimum reserve requirements on the private banks by the central bank, will have no constraining influence on the credit creation activities of the private banks relative to a system where there are no requirements other than the rule that reserve balances have to be positive.

Answer: True

• 3. If the external sector is in deficit overall and GDP growth rate is faster than the real interest rate, then:

Answer: Either the private domestic sector or the government sector overall can pay down their debt liabilities.