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Saturday Quiz – July 18, 2009

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 five questions. Your results are only known to you and no records are retained.

1. If more people flow out of employment into unemployment than flow into employment from unemployment in any month, then the unemployment rate will




2. In a fixed coupon government bond auction, the higher is the demand for the bonds




3. The automatic stabilisers that are built into fiscal policy ensure that




4. A sovereign government does not have to issue debt to finance its spending. But the more public debt it voluntarily issues




5. It is argued that the deleveraging of the Japanese private sector helped Japan avoid recession in the 1990s because the increased savings provided the finance for the huge budget deficits.






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    This Post Has 5 Comments
    1. Can you just explain the main impact the deleveraging the private sector will have on the economy if it’s not getting a country out of recession. I got really confussed on question 5, I am not really sure. Also, does the quiz have to be on Saturday?

    2. Dear Katrina

      The answer is:

      This statement is incorrect because the saving intentions of the private sector would have been thwarted if the government deficits had not have provided enough spending to allow the economy to grow

      because the economy could not have grown at all if the de-leveraging was the only thing happening. As the private sector tried to increase their savings (as a whole) to reduce their debt levels, GDP would have fallen due to the drop in aggregate demand. This process would have continued and the fall in income would have reduced overall private saving. The only way that the private sector could enjoy higher saving and for the economy to grow was via the Japanese government running huge deficits which filled the demand gap and therefore “funded” the savings.

      The quiz is on Saturday because it is convenient for me to do it then.

      best wishes
      bill

    3. Dear Bill,

      Q1. is a bit Quirky (no pun intended)
      More persons status changed from employed to unemployed than it did from unemployed to employed.

      As you never mentioned changes for cohorts not in the labour force or entry into emplyment from bot in labour force then wouldn;t the sensible thing be to assume they are fixed / constant magnitudes ?

      The point you are trying to make I guess is that the so called “EXPERTS” rarely if ever differentiate between stocks and flows.

      cheers, Alan

    4. Dear Alan

      I was just trying to bring home that when the cycle changes flows also lead to changes in the labour force – discouraged workers, new entrants etc.

      So, for example, everyone in our region is applauding the relatively small rise in the unemployment rate at present. But what is keeping it low as employment falls is the rapidly shrinking labour force (declining labour force participation rate).

      best wishes
      bill

    5. Hi bill

      [quote]
      So, for example, everyone in our region is applauding the relatively small rise in the unemployment rate at present. But what is keeping it low as employment falls is the rapidly shrinking labour force (declining labour force participation rate).
      [/quote]

      this is exactly what’s happening in the UK, the green shootists are buoyed by lower monthly claimant figures despite quarterly unemployment figures looking bad whichever way it’s spun.

      These ‘improved’ figures are used as evidence of recovereh, normally accompanied by comments about unemployment being a lagging and coincident indicator. In the US we even have bernanke talking about a jobless recovery.

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