Quiz #508

• 1. A national government can run a balanced fiscal position (taxes equal spending) over the economic cycle (peak to peak) as long as it accepts that, after all the spending adjustments are exhausted, their strategy will ensure that households and firms overall spend more than they earn - that is, run down previous savings or accumulate more net debt.
• False
• True
• 2. A basic understanding of Modern Monetary Theory (MMT) would argue that mass unemployment is due to a deficiency in aggregate demand which would then lead one to reject the conclusion that excessive real wage demands by workers can cause such unemployment.
• False
• True
• 3. A fiscal surplus indicates that the national government is:
• Trying to slow the economy down to contain inflation.
• Trying to reduce public debt.
• You cannot conclude anything about the government's policy intentions.

Quiz #508 answers

• 1. A national government can run a balanced fiscal position (taxes equal spending) over the economic cycle (peak to peak) as long as it accepts that, after all the spending adjustments are exhausted, their strategy will ensure that households and firms overall spend more than they earn - that is, run down previous savings or accumulate more net debt.

Answer: False

• 2. A basic understanding of Modern Monetary Theory (MMT) would argue that mass unemployment is due to a deficiency in aggregate demand which would then lead one to reject the conclusion that excessive real wage demands by workers can cause such unemployment.

Answer: False

• 3. A fiscal surplus indicates that the national government is:

Answer: You cannot conclude anything about the government's policy intentions.