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The Weekend Quiz – October 6-7, 2018

Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.

1. The ECB has announced that it will taper its quantitative easing over the next few months. The steady decline in purchases of government bonds from the non-government sector will reduce the growth of net financial assets in that sector.

2. The immediate change in the net worth of the non-government sector when the government increases its net spending is invariant to government issuing debt which exactly matches ($-for-$) the increase in net public spending.

3. A rising government deficit will always allow the private domestic sector to increase its overall saving in nominal terms.

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    This Post Has 3 Comments
    1. OMG 3/3 this week!

      My slight query for number 1 is when QE tapers off, yields in theory go up and bond prices fall – does that reduce the value of the assets held and hence the growth in the value of the net financial assets – so a bond worth x during QE is now worth less than x?

      I understand that just because the ECB isn’t buying them anymore that doesn’t mean governments won’t be issuing them when they deficit spend.

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