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Saturday Quiz – August 1, 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. The huge build-up of reserves in the US Banking system make it easier for banks to lend to credit worthy customers.

2. If the non-government sector desires to net save in the currency of issue and acts accordingly, national income (GDP) adjustments will ensure the government sector is in deficit, irrespective of the intentions of the government.

3. The capacity of the central bank to conduct monetary policy is not independent of the level of bank reserves unless they pay interest on excess reserves.

4. The problem with foreigners holding significant public debt is that if they lose confidence and liquidate their debt holdings, the local exchange rate will depreciate sharply.

5. The US government could stimulate bank lending by imposing a tax on excess reserves held by the banks at the central bank.

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