Quiz #520 answers

• 1. A central bank can pay any rate on excess reserves to the commercial banks that it chooses independent of its other monetary policy settings.

Answer: False

• 2. Only one of the following propositions is possible (with all balances expressed as a per cent of GDP):

Answer: A nation can export less than the sum of imports, net factor income (such as interest and dividends) and net transfer payments (such as foreign aid) and run a government sector surplus of equal proportion to GDP, while the private domestic sector is spend

• 3. Modern Monetary Theory (MMT) demonstrates that mass unemployment arises from deficient aggregate demand which calls for an increase in the fiscal deficit to correct the deficiency. This observation is totally at odds with the mainstream view that unemployment can be reduced by cutting real wages relative to productivity.

Answer: False