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The Weekend Quiz – July 2-3, 2016

Welcome to The Weekend Quiz, which used to be known as the 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 there is more "money" in the economy its value will decline.

2. If national government public works expenditure leads to the construction of a road, which the government proceeds to tear up and rebuild next year, then there is no net gain for society the second time round.

3. Consumption adds to aggregate demand and imports drain aggregate demand. The marginal propensity to consume (MPC) is conceptually the extra consumption that is induced for every extra dollar of national income. The marginal propensity to import (MPM) is similarly the extra spending on imports that is induced for every extra dollar of national income. If the MPC and MPM both rise by 0.1 then the impact on aggregate demand for every new dollar of national income generated will be neutral.

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    This Post Has 5 Comments
    1. My first 3/3 after reading Bill’s blog for a couple of years. Was I luck or am I improving. I think I’m getting better at thinking about the assumptions but not so good at seeing the whole pattern of connections like Wittgenstein’s ‘perspicuous representation’

    2. In Sweden government parties (minority gov.) and opposition have now after one year’s talk agreed on financial framework, with the guidance of Sweden’s prominent NE professors Lars Calmfors.

      Previous the target was that there should be one percent surplus over a business cycle. Government wanted it to be balance +-0, opposition still wanted 1%. They reached a compromise on 1/3 percent, +0.33 %. But added a new goal, something they call a debt anchor of 35% .

      Now they are all so happy over this “historic” compromise. They believe they have secured the future public finances and should have plenty of space if some crisis hit.
      Nothing about how it relates to foreign affairs or maximize potential productive capacity for the wellbeing of the citizens.

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