Saturday Quiz – May 12, 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. The non-government sector are wealthier when a government issues bonds by the government to match its budget deficit.



2. Ignoring any reserve requirements, a central bank will eliminate any need to conduct open market operations to ensure its target policy rate is achieved each day by paying a positive interest rate on overnight reserves.



3. Ignoring any reserve requirements, bank reserves will be higher than otherwise if the central bank pays a positive return on overnight reserves held by the commercial banks equal to its current policy rate.



4. When a country runs a small current account deficit and the private domestic sector is saving overall, the government budget balance will always be in deficit.



5. Premium question: Most major political parties around the world support the imposition of austerity budgets on their economies. The major difference is that so-called "progressives" prefer tax rises rather than spending cuts whereas so-called "conservatives" recommend spending cuts and privatisation. In terms of the initial impact on national income, which policy option will be more damaging - a tax increase which aims to increase tax revenue at the current level of national income by $x or a spending cut of $x?







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    This Post Has 6 Comments

    4. Acorn, read the Barro article. It is just embarrassing that Barro would write that, extraordinarily so. It does not take knowledge of MMT to rip through that kind of stuff.

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