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Saturday Quiz – August 11, 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. If the inflation rate is steady and the central bank maintains a constant nominal interest rate, then under current institutional arrangements where governments match deficit spending with debt issuance to the private sector, the public debt ratio will rise if the government deficit doubles (say, from 2 to 4 per cent of GDP).

2. The neo-liberal era has been characterised by a declining wage share in national income in many nations. This means that the real living standards of worker's has been systematically eroded in these nations.

3. Real wages will rise if the rate of growth in nominal earnings outstrips the growth in labour productivity (output per unit of labour input).

4. When a nation runs a budget surplus it indicates that the national government is trying to slow the economy down and contain inflation.

5. Premium Question: Suppose that the government announced as part of a fiscal austerity strategy that it intended to cut its deficit from 4 per cent of GDP to 2 per cent in the coming year and during that year net exports were projected to move from a deficit of 1 per cent of GDP to a surplus of 1 per cent of GDP. In that situation we would not be able to conclude that the fiscal austerity plans would undermine growth if the net export projection was realised.

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