Quiz #234

• 1. If workers succeed in gaining real wages increases then, other things equal, the share of profits in national income is squeezed.
• False
• True
• 2. Government spending can crowd out private spending, which means that an increase in the former will reduce the latter.
• False
• True
• 3. 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.
• False
• True

Quiz #234 answers

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

Answer: False

• 2. Government spending can crowd out private spending, which means that an increase in the former will reduce the latter.

Answer: True

• 3. 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