Saturday Quiz – December 27, 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 #301

• 1. Which fiscal deficit outcome is the least expansionary in terms of its impact on real GDP growth?
• 1 per cent of GDP
• 2 per cent of GDP
• 3 per cent of GDP
• Cannot say because it depends on the decomposition of the structural and automatic stabiliser components.
• 2. When the government matches its deficit with debt-issuance it changes the portfolio of wealth held in the non-government sector and the impact on purchasing power is equivalent to a leakage from the expenditure system (akin to taxation, saving or imports) which reduces the expansionary impact of the government deficit spending.
• False
• True
• 3. If the government reduces its net spending by say $10 billion, the net financial assets destroyed by this fiscal withdrawal could be replaced by the central bank engaging in a $10 billion quantitative easing program.
• False
• True

Sorry, quiz 301 is now closed.

You can find the answers and discussion here