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Saturday Quiz – August 20, 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. Issuing government debt reduces the risk of inflation arising from deficit spending because the private sector has less money to spend.



2. When the government matches it deficit with new debt issues the non-government sector wealth rises.



3. If net exports are running at 2 per cent of GDP, and the private domestic sector overall is saving an equivalent of 3 per cent of GDP, the government must be running a surplus equal to 1 per cent of GDP.



4. Choose the correct response (all balances expressed as a per cent of GDP):
(a) A nation can export less than the sum of imports, net factor income (such as interest and dividends) and net transfer payments (such as foreign aid) and run a government surplus of equal proportion to GDP, while the private domestic sector is spending less than they are earning.
(b) A nation can export less than the sum of imports, net factor income (such as interest and dividends) and net transfer payments (such as foreign aid) and run a government sector surplus of equal proportion to GDP, while the private domestic sector is spending more than they are earning.
(c) A nation can export less than the sum of imports, net factor income (such as interest and dividends) and net transfer payments (such as foreign aid) and run a government sector surplus that is larger, while the private domestic sector is spending less than they are earning.
(d) None of the above are possible as they all defy the sectoral balances accounting identity.





5. Premium question: To reduce the public debt ratio, the government has to eventually run primary budget surpluses (that is, spend less than they raise in taxes).





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    This Post Has 11 Comments
    1. “… export less than the sum of imports, net factor income (such as interest and dividends) and net transfer payments (such as foreign aid) and … ”

      Shouldn’t that be “… exports less than [imports less {net factor income such as interest and dividends) and net transfer payments (such as foreign aid)}]” and … ?

      Because, exports always appear with the same sign as net factor income etc.

      OR

      “… imports more than the sum of exports, net factor income (such as interest and dividends) and net transfer payments (such as foreign aid) and …”

    2. Finally – 5 out of 5. And I’ve been working on this for two months. Eye-opening stuff, Bill. Good for you and all the MMTers.

      Jim

    3. Hi Guys,

      love the quiz, I got 4/5 on my first pass. As I am a marketer I must be reading way to much Economic news of late!

      Thank you for this!

      TM.

    4. Finally, a score of 5. Although question 4 nearly threw me off. I was fine on everything except the wording of “…a government sector surplus of equal proportion to GDP”. I guess that just means that the surplus will track GDP growth.

    5. Don’t get too excited with your results: even I, who often do dismally on these things, got a 4/5. I think this quiz was easier than usual.

      Or, maybe, just maybe, I’m starting to see the light. Given our (i.e., the US’s and Europe’s) grossly dysfunctional political arrangements at present, I might as well climb a pillar in the desert and tell it to the sun, for all the good that such enlightenment will do me or anyone else. But still, the fat green check marks are gratifying.

    6. I think it was an easier quiz than usual.
      No “billy-tricks” with language.
      No doubt we’ll pay for this collective hubris next week.

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