Saturday Quiz – February 1, 2014

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 #254

  • 1. Increasing tax revenue provides the government with more capacity to spend.
    • False
    • True
  • 2. If there is an external deficit, and the domestic private sector successfully increases its overall saving as a percentage of GDP, then income adjustments will ensure the government fiscal balance is in deficit.
    • False
    • True
  • 3. Estimates of structural fiscal deficits published the multilateral agencies such as the IMF and the OECD are to be treated with suspicion because they are based on excessively optimistic estimates of potential GDP.
    • False
    • True

Sorry, quiz 254 is now closed.

You can find the answers and discussion here

This Post Has 5 Comments

  1. trick questions totally keep stumping me. it’s only when re-reading them afterwards you notice the minor detail that changes everything.

  2. @pebird: does that matter? businesses in the private domestic sector have to be run like households, do they not?

  3. hamstray,

    They do have to fund deficits in the same way, but the point is about how many sectors the economy is divided into.

    If you divide into three:

    1) Private domestic

    2) Government

    3) Foreign

    then if 1 and 3 are running surpluses, 2, the government, will run a deficit.

    If you split 1 into households and busineses, then you need to know what both are doing in order to know the overall balance. Households could be running a surplus, but if businesses are running a larger deficit the domestic private sector will be in deficit, and vice versa.

    So if you think of households as being the same as the domestic private sector you’ll miss a chunk of the economy.

  4. Yep, there is household and business which make up domestic. Households can save, while business can be investing, allowing (not requiring) the government to be in surplus and the external sector to be in deficit, assuming sufficient private investment.

    I know all that, but sometimes I’m lazy, it’s an American thing.

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