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Saturday Quiz – December 15, 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. A program of fiscal austerity which drains aggregate demand growth may not undermine attempts by the private domestic sector to reduce its indebtedness.

2. Governments concerned with their public debt ratio should encourage growth because the debt ratio falls once economic growth resumes.

3. The money multiplier is in fact more correctly considered to be a divisor relating the monetary base to the money supply.

4. A nation can run a current account deficit accompanied by a government sector surplus of equal proportion to GDP, while the private domestic sector is spending more than they are earning.

5. Premium Question: Government deficit spending would have a greater expansionary impact on aggregate demand if the central bank bought the public debt to match the deficit instead of a situation where the government matches it deficit by issuing debt to the private sector.

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