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Saturday Quiz – January 26, 2013

Welcome to the Invasion Day – 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. Economists distinguish between the structural and the cyclical components of the budget outcome as a way of determining whether the fiscal policy stance of the government is expansionary, neutral or contractionary. In that context, which of the following situations represents the more expansionary outcome:

2. If private domestic investment is greater than private domestic saving and the current account is draining aggregate demand then the government budget has to be in deficit no matter what level of GDP is produced.

3. A central bank running a policy rate of near zero could always directly purchase Treasury debt to facilitate the government’s budget deficit without compromising its monetary policy stance.

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