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Saturday Quiz – September 25, 2010

Welcome to the billy blog Saturday quiz. The quiz tests whether you have been paying attention over the last seven days. See how you go with the following five questions. Your results are only known to you and no records are retained.

1. In a fiat monetary system (for example, US or Australia) with an on-going external deficit, if you desire the domestic private sector to reduce its overall debt levels without employment losses, then you have to support the national government continually increasing the budget deficit in line with the private de-leveraging process.

2. The only time that a budget surplus represents increased national savings is when the government creates a sovereign fund.

3. The massive build-up of Chinese holdings of US government debt has allowed US citizens to enjoy a higher material standard of living overall at the expense of the residents of China.

4. Short-term interest rates are set by the central bank while the fiscal strategy manifests in tax and spending decisions by the government. Whereas the private sector cannot directly influence the interest rate target being set the budget outcome at any point is not something the government can control.

5. If employment growth matches the pace of growth in the civilian population (people above 15 years of age) then the economy will experience a constant unemployment rate as long as participation rates do not change.

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    This Post Has 12 Comments
    1. Bill,

      you should consider to change your quiz slightly! I constantly score 4/5 or 5/5 in the meantime. Although this is gratifying it also becomes boring. I don’t need confirmation that I’m a brilliant macro thinker. I know that!

      And I think I know what’s wrong. I’ve tried the same thing with some quiz for students of standard macro-economics. The first trick is to formulate questions which seem to be true and change/omit only one slight detail. But the most important thing is always to have the ideological bias of the author on mind. Which makes you a macro-graduate.

      For instance the test for the book of some Michael Parkin. I tried it. I scored mostly in the range of 75-100% and got congratulations for reading his book so thoroughly. I don’t own the book and I’ve never read a single line? Someone wants to check whether he’s as brilliant as I’m? Here you can try:

      My suggestion: Add some premium counter-intuitive questions or some questions which require further research on for instance history of economic thought. I mean this quiz should be fun for everybody. For first time visitors and Billy-addicts. What do you think?

    2. Stephan,
      Trouble is, many people come onto this blog who, like me, are easily thrown by complex questions, as many of us are just enthusiastic amateurs. The last time I got 0/10 I didn’t take the test for a month, and so probably lost an opportunity to improve my understanding. I think that it would be good to have a mix of different levels of hardness. Ultimately i’m just grateful for the educational service Bill provides for free.


    3. Dear Stephan (at 2010/09/25 at 5:59)

      You have identified a problem which has two sources:

      First, there is a general pedagogical problem faced by all academics who teach a “principles” course (introductory or intermediate). This is that the class is typically very heterogeneous with people of different discipline backgrounds, life experiences and talents. I have always tried to be an inclusive teacher in the sense that I don’t want the person who finds the work the hardest (because of their background, propensities etc) to be left behind should they endeavour (through application) to enjoy the teaching I provide. That is a challenge because then you have to deal with the fact that the “best” students (and I am cautious to create hierarchies) might not be suitably challenged and become distracted. I try to deal with that problem by extra engagement with these students – answering their questions after classes, by E-mail etc. The balance is not easy though.

      In the context of the Internet I cannot easily have a cup of tea with an interested student who wants to push harder than most. Although I might pre-announce that I am working on a virtual classroom that I hope to attach to my blog in the coming months which will allow up to (maybe) 10-20 people to enrol at set times in an interactive lecture, Q&A, discussion environment with me should their be interest. A real-time, interactive classroom via the Internet with video, audio and blackboards, slideshows etc. I am working on the code for that at present although it is taking some time.

      Second, the other problem is totally different. The Saturday Quiz was to provide readers with some fun, perhaps a challenge, and to maintain contact with my blog but at the same time allow me to live my life (that is, not to be chained to the blog). I worked on building up a large stock of questions which I have started recycling. It means I can be “blog free” almost at weekends which pleases my family and me!

      The compromise that I will consider is to introduce a Premium Question each week which will be devilishly difficult and challenge the “brilliant macro thinkers” like yourself. Then the newcomers to my site will judge their progress by aiming to get 4/4 while the genii such as yourself will have to get the “boring” questions all correct plus the Premium Question.

      The only problem with that plan is that I might not be bright enough to construct such a question (-:

      Thanks for pointing out the issue – I have worried about it for a while but just didn’t want to put a lot more time into the question bank for a while.

      best wishes

    4. Bill,

      Thanks for your answer. I do understand your problem. And I would like to point out that I owe much of my recent new found “brilliance” to your relentless postings on macro-economics. I completely agree with your assessment that any preference for leisure must be globally enforced and people should spend more time with family, friends and books. Given that I will most probably be passenger on ship earth only for the next 30 years I intend to do the same. But I think there’s a solution. Why not just post an open question? Something on your mind. Like in economics journals organized along mafia rules you will enjoy to be the only referee on comments ;-) And like in the real world you can take plenty of time with your judgement. Cheers. Stephan

    5. @Charlie
      One of the hardest things for a non-native English speaker is to write light-weight ironic comments. I’m learning this lesson again and again. And obviously I’m not good at it. Any idea how I can progress? So just for the record: YES Bill provides a priceless educational service for the public. If someone here is brilliant it might be him (I’m in no position to judge on macro credentials beside using my brain.) and certainly not me. But I consider myself enlightened in comparison to economists who consider themselves brilliant and nobel worthy.

      And now it’s 1:30 in the morning and my bed emails that I should stop posting stuff and instead do what every sane person does at this time which is dreaming. Goodnight!

    6. Hi Bill,

      Re no.2 does this mean that Norway is wasting its money by investing its oil wealth in a sovereign fund? My understanding is that if they didn’t do that the influx of foreign exchange would cause there currency to appreciate rendering there export sector uncompetitive. The only alternative would be slow there oil/gas pumping so the economy didn’t get swamped by the foreign exchange earnings. Also doesn’t these claims on foreign assets represent a form of national saving to them? Its not like they have 10%+ unemployment that the money would be better spent on i.e. they run there fiscal ship with an eye towards full employment. What else would they do with the forex inflows?

      Thanks as always….

    7. Stephan,
      I hadn’t noticed any proplems with your light-weight ironic comments. I used to be very ironic / sarcastic, and found people were taking me too seriously. I solved the problem by doing it a bit less, and giving people clues that I might not be talking entirely honestly. One way I sometimes use, is to exaggerate what I’m saying so much, that people know I could not possibly mean what I am saying.

      Another thing to consider is that on a blog, people may well know that you are being intentionally flippant or humorous about something, yet they might find something in your comment that is genuinely serious and worth replying to anyway.

      I used to worry about this, but then I figured out that being as good looking as I am, and given that I always have at least three girl friends, why am I worrying!?

      Kind Regards

    8. Damien Re no.2 does this mean that Norway is wasting its money by investing its oil wealth in a sovereign fund?

      This is somewhat similar to China buying US tsy’s with the proceeds of its export sales to the US in order to tame inflation at home instead of convertng dollar sales to yuan and dumping yuan into the Chinese economy, overstimulating an already hot economy and provoking inflation.

    9. Stephan, I often use irony and satire on the political blogs and incredibly some people always take it seriously, even when it is completely outrageous. So now I usually add (snark) after the comment so that the dense will get it.

    10. Bill:

      I would be very interested in the interactive classroom. I hope by the time you are done coding my USD still has some value in Austraila!

      Best wishes,

      P.E. Bird

    11. Bill, (in the spirit of the comment by Stephan) why do not you introduce a complexity score attached to every question? So that if someone gets a question wrong but the weight of it is set as super-heavy than, first, it would not distract that person and, second, would allow you to tweak questions in line with what Stephan suggests. And should be easy to implement :)

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