Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern…
The Weekend Quiz – December 31-January 1, 2016-17
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.
Quiz #406
- 1. A rising public debt ratio during a recession is of no concern because it falls once economic growth resumes.
- False
- True
- 2. Only one of the following propositions is possible (with all balances expressed as a per cent of GDP) - a nation can run a current account deficit:
- Accompanied by a government sector surplus that is larger, while the private domestic sector spends less than it earns.
- None of the above are possible as they all defy the sectoral balances accounting identity.
- Accompanied by a government sector surplus of equal size, while the private domestic sector spends less than it earns.
- Accompanied by a government sector surplus of equal size, while the private domestic sector spends more than it earns.
- 3. The expansionary impact of deficit spending on aggregate demand will be lower when the government matches its fiscal deficit with debt-issuance compared to a situation where it issues no debt.
- False
- True
Sorry, quiz 406 is now closed.
You can find the answers and discussion here
No fair Bill; trick questions when we’re still full of mince pies. The correct answer to Q 2 – “Only one of the following…” – must be ‘False’ since both proposition 2 and proposition 3 are possible, no?
I agree with Eddie’s observation. As for question three, I got the right answer but it would seem to me that continuous debt issuance to ‘fund’ deficit spending will eventually negatively impact any stimulus program. The success of increasing aggregate demand could be reduced because of the negative impact in the operating budget of increasing compound interest costs on government spending. If the debt were to be publicly owned, as opposed to privately owned, then the operating budget could be considered a ‘wash’ because it is taxpayer paying off taxpayer. Plus not all stimuli are equal, no? The aggregate demand increase needs to be larger than the additional compound interest cost in order to stimulate. My thinking is that, over time, debt free stimulus will increase aggregate demand better.
Dear Eddie Baker (at 2016/12/31 at 2:43 am) and Chris Herbert
Thanks for the input. I haven’t been eating mince pies but still managed to include a typo in Option C – which should be “less” rather than “more”. Then it all makes sense. A quick cut and paste at the airport as the boarding call was being made led to this travesty (-:
best wishes
bill
I think we can put that down to a lack of mince pies then 🙂
Best wishes, and thanks for all the work you do.