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Saturday Quiz – March 10, 2012

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

1. Assume a nation is running an external surplus equivalent to 2 per cent of GDP and the private domestic sector is currently saving overall 1 per cent of GDP. In this situation, the government must be running a budget deficit equal to 1 per cent of GDP.

2. Start from a situation where the external surplus is the equivalent of 2 per cent of GDP and the budget surplus is 2 per cent. If the budget balance stays constant and the external surplus rises to the equivalent of 4 per cent of GDP then you can conclude that National income also rises and the private surplus moves from 0 per cent of GDP to 2 per cent of GDP.

3. If all bank loans had to be backed by reserves held at the bank then this would act as a brake on the capacity of the banks to lend and help maintain financial stability.

4. The imposition of taxation is an essential element in a sovereign government's plan to implement and provision its socio-economic agenda.

5. Premium Question: Assume a nation's central bank successfully maintains a zero interest rate policy and recession keeps the inflation rate at zero. Under these circumstances a fiscal austerity program can achieve reductions in the public debt ratio even if the movements in the automatic stabilisers that result from the recession that the austerity causes reduce the growth of tax revenue.

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    This Post Has 3 Comments
    1. « You scored 4 out of 5.
      You thus achieved a score of 80.00 per cent overall. (…)
      If you scored between 70% and 90% you are becoming a soldier in the modern monetary army. »

      Yeeha, I desserve to be a MMT blogger !

      Weirdly I got the second question wrong, in spite of it being basically the same as the first question…

    2. My worst result in weeks. Very disappointing. I cannot wait to see all I got wrong.

      Now, about the following statement, “The imposition of taxation is an essential element in a sovereign government’s plan to implement and provision its socio-economic agenda.” Except in the broad sense that taxes drive money, I don’t see how the provisioning portion of the above statement can be true. So I would say “implement” yes, provision, “no”.

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