Quiz #6

• The Australian (or US, for that matter) government's net spending is
• similar in impact to money created by commercial bank credit creation.
• unique because spending derived from private credit creation cannot add to the private sector's net worth.
• unique because the Government can always pay for goods and services by crediting bank accounts.
• While it is likely that the GDP (output) gap will be around 5 per cent this year, the national government's capacity to fill this gap
• will be constrained by nothing but its political will.
• will be constrained by how much private bank lending is available to facilitate spending by consumers and firms.
• will be constrained by its ability to access capital in the global markets given the lack of credit available domestically at present.
• From the perspective of aggregate demand, creating a minimum wage private sector job
• will probably be better than creating a minimum wage public sector job because the private sector job is likely to be more productive.
• will probably be better than creating a minimum wage public sector job because the private sector job reflects market choices of what people want to buy.
• will probably have the same impact as creating a minimum wage public sector job.
• If the Government introduced a permanent Job Guarantee (offer of minimum wage job to anyone who wanted it) then
• it would have no inevitable implications for future deficits or aggregate demand levels.
• it would mean that aggregate demand would always be higher than otherwise.
• it would lock itself into budget deficits forever.
• The losses that the Futures Fund (or any sovereign fund) has made on its share holding
• suggest that public and hence national saving has declined which will diminish the capacity of the national government to net spend in the future.
• are similar in concept to any depreciating publicly-held asset and have no implications for the national government's future capacity to net spend.
• may need future taxation revenue offsets to restore the capacity of the national government to net spend in the future.

Quiz #6 answers

• The Australian (or US, for that matter) government's net spending is

Answer: unique because spending derived from private credit creation cannot add to the private sector's net worth.

Explanation: Please see Money multiplier and other myths or post a question via the comments page.

• While it is likely that the GDP (output) gap will be around 5 per cent this year, the national government's capacity to fill this gap

Answer: will be constrained by nothing but its political will.

Explanation: Please see How large should the deficit be? or post a question via the comments page.

• From the perspective of aggregate demand, creating a minimum wage private sector job

Answer: will probably have the same impact as creating a minimum wage public sector job.

Explanation: Please see Boondoggling and leaf-raking or post a question via the comments page.

• If the Government introduced a permanent Job Guarantee (offer of minimum wage job to anyone who wanted it) then

Answer: it would have no inevitable implications for future deficits or aggregate demand levels.

Explanation: Please see Boondoggling and leaf-raking or post a question via the comments page.

• The losses that the Futures Fund (or any sovereign fund) has made on its share holding

Answer: are similar in concept to any depreciating publicly-held asset and have no implications for the national government's future capacity to net spend.

Explanation: Please see The Futures Fund scandal or post a question via the comments page.