Quiz #363

• 1. The mainstream macroeconomics conception of the banking system characterised by the concept of the money multiplier posits that changes in the monetary base are driven by changes in the money supply.
• False
• True
• Only in the absence of a liquidity trap
• 2. If the nation is running a current account deficit which is accompanied by a government sector surplus of equal size, then the private domestic sector will always be spending more than its income.
• False
• True
• 3. With the Eurozone nations unable to gain competitive relief via nominal exchange rate adjustments the hope is that by deflating wages and prices real unit labour costs will fall. Assuming other nations do nothing and wages and prices in one nation fall at the same rate, then a real exchange rate depreciation (relative to other nations) requires labour productivity and employment growth to rise.
• False
• True

Quiz #363 answers

• 1. The mainstream macroeconomics conception of the banking system characterised by the concept of the money multiplier posits that changes in the monetary base are driven by changes in the money supply.

Answer: False

• 2. If the nation is running a current account deficit which is accompanied by a government sector surplus of equal size, then the private domestic sector will always be spending more than its income.

Answer: True

• 3. With the Eurozone nations unable to gain competitive relief via nominal exchange rate adjustments the hope is that by deflating wages and prices real unit labour costs will fall. Assuming other nations do nothing and wages and prices in one nation fall at the same rate, then a real exchange rate depreciation (relative to other nations) requires labour productivity and employment growth to rise.

Answer: False