skip to Main Content

The Weekend Quiz – August 27-28, 2016

Welcome to The Weekend Quiz, which used to be known as the Saturday Quiz! The quiz tests whether you have been paying attention or not to the blogs I post. See how you go with the following questions. Your results are only known to you and no records are retained.

1. Assume that a nation is running an on-going external deficit of 2 per cent of GDP. If the private domestic sector successfully spends less than its income, then we would always find a public sector deficit being recorded.

2. The government has to issue debt if the central bank is targetting a non-zero policy rate and is reluctant to pay a return on excess bank reserves.

3. Assume that inflation and nominal interest rates are both constant and zero and a country has a public debt to GDP ratio of 100 per cent. The approach taken by those who support fiscal austerity is to run primary fiscal surpluses to stabilise and then reduce the debt ratio. Under the circumstances given, this strategy can still work even if the economy contracts under the burden of the surpluses.

Spread the word ...
    This Post Has 3 Comments
    1. Off topic to the Friday quiz but please let me know what is going on here. On the Thursday 7:30 Report we heard the Treasurer tell us that we are running a huge deficit & consequently the interest is killing the us. Also, the deficit will run the country into a recession. Is he just lying or is there an economic theory behind his assertions. From what I know of MMT this is just plain nonsense.

    2. Dear Rob (at 2016/08/26 at 8:14 pm)

      The Treasurer is lying or parroting notes he doesn’t understand that have been written by other liars.

      I will deal with this debate next week.

      best wishes

    3. @Rob Holmes,

      Hi Rob,

      Motormouth Morrison and other neoliberals regularly try to soften up people for a TINA approach to the economy, ie There is No Alternative to cutting public programs if we are to achieve the necessary goal (not!) of budget repair.
      Of course, he will likely actually induce a recession by cutting spending overall in the context of an already weak economy, rather than avert one by cutting, though much may not pass the Senate.

    Leave a Reply

    Your email address will not be published. Required fields are marked *

    This site uses Akismet to reduce spam. Learn how your comment data is processed.

    Back To Top