Saturday Quiz – May 4, 2013

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.

Quiz #215

• 1. When economic growth resumes, the automatic stabilisers work in a counter-cyclical fashion to ensure that the government budget balance returns to its appropriate level.
• False
• True
• 2. The Modern Monetary Theory (MMT) analysis of central bank liquidity management operations tells us that if such a bank was targeting a 4 per cent policy rate, it would still be able to directly purchase all the Treasury debt that might be issued to match a national government's budget deficit without compromising that monetary policy stance.
• False
• True
• 3. When a sovereign government issues debt to match its net spending (budget deficit) it logically:
• increases the financial assets that are held by the non-government sector $-for-$.
• has no impact on the overall holdings of financial assets held by the non-government sector $-for-$.
• reduces the capacity of the overall private sector to borrow from banks because it drains the deposits in the banking system to buy the bonds.

Sorry, quiz 215 is now closed.

You can find the answers and discussion here