Quiz #407

• 1. Modern Monetary Theory (MMT) characterises the interaction between the government sector (treasury and central bank) and the non-government sector in terms of vertical transactions, which change the net financial asset position of the non-government sector. These are in contrast with transactions within the non-government sector, which net to zero in terms of the impact on that sector's net financial asset position. Both quantitative easing (a central bank operation) and net public spending (a treasury operation) satisfy this definition of a vertical transaction.
• False
• True
• 2. The real wage can only grow if the rate of growth in earnings outstrips labour productivity growth.
• False
• True
• 3. A fiscal deficit equivalent to 3 per cent of GDP is more stimulatory than a deficit equivalent to 1 per cent of GDP< even if we do not know what the structural and cyclical break down of the aggregate figure is.
• False
• True

Quiz #407 answers

• 1. Modern Monetary Theory (MMT) characterises the interaction between the government sector (treasury and central bank) and the non-government sector in terms of vertical transactions, which change the net financial asset position of the non-government sector. These are in contrast with transactions within the non-government sector, which net to zero in terms of the impact on that sector's net financial asset position. Both quantitative easing (a central bank operation) and net public spending (a treasury operation) satisfy this definition of a vertical transaction.

Answer: False

• 2. The real wage can only grow if the rate of growth in earnings outstrips labour productivity growth.

Answer: False

• 3. A fiscal deficit equivalent to 3 per cent of GDP is more stimulatory than a deficit equivalent to 1 per cent of GDP< even if we do not know what the structural and cyclical break down of the aggregate figure is.

Answer: True