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Saturday Quiz – January 15, 2011

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 six questions. Your results are only known to you and no records are retained.

1. A coordinated fiscal austerity plan across all nations (aiming to run budget surpluses) would not be possible without impairing growth because it is likely that the private domestic sector in some countries will desire to save overall.

2. The government can always support private domestic sector saving in nominal terms by increasing the budget deficit and stimulating aggregate demand and national income.

3. The ratio of the "stock of money" and bank reserves has fallen dramatically in the US in recent years. This is best understood in terms of the tightly constrained credit markets due to recession.

4. The higher the tax revenue, the more the government can spend.

5. Premium question: A sovereign national government cannot generate full employment without taxation.

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    This Post Has 5 Comments
    1. About Q3, is “stock of money” and the amount of medium of exchange the same thing so that they are equal to currency plus demand deposits?

      The way the system is set up now is all NEW medium of exchange demand deposits created from debt whether private debt or gov’t debt?

    2. Meh, 20%

      Perhaps I am overlooking the importance of key words, such as ‘can always’ and ‘domestic’ in question 2. I am looking forward to seeing the reasoning behind #4. It is kind of a trick/awkwardly worded question given the answer.

    3. Alex, I don’t think #4 is a trick question. The thing that gets me is I rarely ever get all 5 questions right, I probably average around 3 but I always get the Premium question correct.

    4. I only got the premium question right, I hope I answered true for the right reason.
      A sovereign national government cannot generate full employment without taxation.

      It s taxation what gives the state currency its value, whithout it no one would accept it as a payment for goods and services. By levying a tax the government creates 100 percent of unemployment first, then the government has to spend so people can pay their taxes, this creates employment.

    5. Also puzzled by number 4. If it is true, it follows that the lower the tax revenue, the less government can spend. If government spending is not revenue-constrained in the first place, how can either be true? They would only be true on a gold standard or currency peg.

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