Quiz #93

• 1. A rising budget deficit indicates an expansionary shift in government policy and the challenge is to ensure the nominal demand stimulus does not exceed the real capacity of the economy to respond by increasing real output.
• True
• False
• 2. The imposition of taxes by the national government creates unemployment, other things equal.
• True
• False
• 3. Under current institutional arrangements, the change in the ratio of public debt to GDP will exactly equal the primary deficit plus the interest service payments on the outstanding stock of debt both expressed as ratios to GDP.
• True
• False
• 4. When economic growth resumes, the automatic stabilisers work in a counter-cyclical fashion and ensure that the government budget balance returns to its appropriate level.
• True
• False
• 5. In a modern monetary economy the monetary base always adjusts to the changes in the money supply.
• True
• False
• 6. Special bonus question: Santa Claus has gone home to:
• Santa Claus doesn't have a home.
• Not sure because we were asleep when he was around.
• The North Pole where he lives with his partner and some elves.

Quiz #93 answers

• 1. A rising budget deficit indicates an expansionary shift in government policy and the challenge is to ensure the nominal demand stimulus does not exceed the real capacity of the economy to respond by increasing real output.

Answer: False

• 2. The imposition of taxes by the national government creates unemployment, other things equal.

Answer: True

• 3. Under current institutional arrangements, the change in the ratio of public debt to GDP will exactly equal the primary deficit plus the interest service payments on the outstanding stock of debt both expressed as ratios to GDP.

Answer: True

• 4. When economic growth resumes, the automatic stabilisers work in a counter-cyclical fashion and ensure that the government budget balance returns to its appropriate level.

Answer: False

• 5. In a modern monetary economy the monetary base always adjusts to the changes in the money supply.

Answer: True

• 6. Special bonus question: Santa Claus has gone home to:

Answer: The North Pole where he lives with his partner and some elves.