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Saturday Quiz – August 8, 2015

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.

1. If a nation's external sector is in balance then the private domestic sector cannot save overall if the government runs a balanced fiscal outcome.



2. A tax increase, which aims to increase tax revenue at the current level of national income by $x, will have a smaller initial negative impact on aggregate demand than a government spending cut of $x?



3 If the external sector is accumulating financial claims on the local economy and the GDP growth rate is lower than the real interest rate, then the private domestic sector and the government sector can run surpluses without damaging employment growth.





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    This Post Has 4 Comments
    1. 1. Depends on the meaning of save. The stock of saving will stay constant to the stock of debt but it will not be able to net save.

    2. “which aims to increase tax revenue at the current level of national income by $x, will have a smaller initial negative impact on aggregate demand than a government spending cut of $x?”
      It’s false.
      Generally the more ‘progressive’ the greater effect on aggregate demand.
      You cannot use money as a barometer to compare them. Different distribution effects.
      Cutting regressive taxes increases AG more than corporate welfare spending that is saved or increasing wages of high salary public sector workers.

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