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The Weekend Quiz – May 5-6, 2018

Welcome to The Weekend 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. Over a given economic cycle (peak to peak), if a nation's external sector is on average balanced and the government gap between its tax revenue and spending is, on average, equal to 1 per cent of GDP, then the private domestic sector's spending-income balance will on average be in:

2. If the private domestic sector is locked into a process of deleveraging, then to avoid the employment losses arising from this lost private spending, governments have to expand public deficits.

3. If the external sector is accumulating financial claims on the local economy (that is, providing foreign savings to the domestic economy) and the GDP growth rate is lower than the real interest rate, then the private domestic sector and the government sector can both run surpluses without damaging employment growth.

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    This Post Has 4 Comments
    1. Forgot the external sector again for question 2 Argh!

      Question 1 is a bit unclear to me though. Gap between tax and spend is ambiguous as to which is one higher and which one is lower.

    2. Yeah, “gap” for me meant public deficit…because gap was defined as positive 1, I.e. 1=1+0 in sectoral balance equation. G-t =1% gdp.

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