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Saturday Quiz – March 19, 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. The Quantity Theory of Money considers that growth in the stock of money will be inflationary. The fact that the large-scale quantitative easing (so-called printing money) in many nations in recent years has not generated inflation demonstrates that the mainstream Quantity Theory of Money is incorrect.

2. Governments pursuing fiscal austerity desire to reduce their public debt ratios. While that desire is ill-founded the strategy will achieve that end but at the cost of higher unemployment.

3. The Confederate government in 1861 could have eased the inflationary impact of its war spending by issuing more bonds than it did.

4. A recent Bloomberg report on the British economy says that "the government has staked its reputation on eliminating the budget deficit ... by the time of the next election in 2015". The current deficit to GDP ratio is around 10 per cent. The declining deficit to GDP ratio will signal the discretionary contraction in net public spending.

5. Premium Question: When net exports are negative, government deficits will be required if the private domestic sector is to save overall.

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    This Post Has 3 Comments
    1. 5/5! the premium question was a nice try. luckily i just read michael hudson’s trade, development and foriegn debt so trade was very much on my mind and i remembered that overall current account balance could be positive through profit remittances, foriegn aid and other such income transfers to the country in question. I hope others catch it.

    2. For Question 5, I was going from last week’s answer to Q 1:

      Periods 5 and 6 show the benefits of budget deficits when there is an external deficit. The private sector now is able to generate surpluses overall (that is, save as a sector) as a result of the public deficit.

      I missed something!

    3. Only 3/5 but I got the Premium Question which I usually do (but not always) and offer Nathan a vote of thanks for helping me get it. I love the trick question. You talk about positives and negatives & then save overall (which is neither positive or negative and could be either)

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