Saturday Quiz – December 22, 2012

Welcome to the last Billy Blog Saturday Quiz before Xmas. 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 there is more "money" in the economy its value declines.

2. A public works program that employs workers to dig deep holes on one day and then fill them in again the next day has exactly the same impact on current economic growth ($-for-$) as a private firm investing in a new factory.

3. Economists note that the automatic stabilisers in the government's budget increase deficits (or reduce surpluses) in times of slack aggregate demand. This sensitivity of the budget outcome to the business cycle would be eliminated if the government followed a balanced budget fiscal rule.

4. If a nation is enjoying an external deficit, then one other sector must be spending more than it is earning.

5. Premium Question: It is clear that the central bank can use balance sheet management techniques to control yields on public debt at certain targetted maturities. However, this capacity to control the term structure of interest rates is diminished during periods of high inflation.

6. Special Xmas Holiday Question: Santa Claus and his elves are in danger of becoming environmental refugees because:

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    2 Responses to Saturday Quiz – December 22, 2012

    1. Andy says:

      One of these questions is not like the others. One of these questions just doesn’t belong.

      5/6. The Christmas question tripped me up. Bravo.

    2. Cleisthenes says:

      These are entertaining quizzes, but some questions are disjointed. Perhaps it would be better to say that the questions assume an MMT type solution is not being employed nor will be employed. This is an MMT blog, yet the quiz assumes an MMT type rationality is not used.

      Those premises are necessary for both the business cycle question and the external deficit question.

      In any case, dexterity is needed to win the day. How, for instance, would you be able to convince conservatives or tea-partiers without using their language in discussions with them? It’s a more effective tack to show how current finance and banking problems involve government favoritism, break budgets and involve subsidies (to those who don’t need them).

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