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Saturday Quiz – January 7, 2012

Welcome to the First Quiz for 2012 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 questions. Your results are only known to you and no records are retained.

1. Assuming the expenditure multiplier is greater than 1, deficit spending will have a greater impact on aggregate demand if there are no offsetting monetary operations by the central bank (government bond sales) draining the excess reserves created.

2. If the government achieves in reducing its net spending by say $10 billion, the net financial assets destroyed by this fiscal withdrawal could be replaced by the central bank engaging in a $10 billion quantitative easing program.

3. The non-government sector is wealthier when the government issues debt to exactly match ($-for-$) its increase in net public spending.

4. When a country runs an external surplus, the national government can safely run a budget surplus without impeding economic growth.

5. Premium Question: Which budget deficit outcome is the most expansionary?

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