Quiz #399

• 1. A sovereign national government can run a balanced fiscal position over the economic cycle (peak to peak) as long as it accepts that after all the spending adjustments are exhausted that the private domestic balance will only be in surplus if the external balance is in surplus.
• False
• True
• Maybe, if private sector indebtedness is low.
• 2. Modern Monetary Theory (MMT) concurs that excessive real wages growth can cause unemployment.
• False
• True
• 3. Imagine that macroeconomic policy is geared towards keeping real GDP growth on trend. Assume this rate of growth is 3 per cent per annum. If labour productivity is growing at 2 per cent per annum and the labour force is growing at 1.5 per cent per annum and the average working week is constant in hours, then the policy-driven trend will lead to a falling unemployment rate.
• False
• True
• Maybe, depending on what is happening with aggregate spending.

Quiz #399 answers

• 1. A sovereign national government can run a balanced fiscal position over the economic cycle (peak to peak) as long as it accepts that after all the spending adjustments are exhausted that the private domestic balance will only be in surplus if the external balance is in surplus.

Answer: True

• 2. Modern Monetary Theory (MMT) concurs that excessive real wages growth can cause unemployment.

Answer: True

• 3. Imagine that macroeconomic policy is geared towards keeping real GDP growth on trend. Assume this rate of growth is 3 per cent per annum. If labour productivity is growing at 2 per cent per annum and the labour force is growing at 1.5 per cent per annum and the average working week is constant in hours, then the policy-driven trend will lead to a falling unemployment rate.

Answer: False