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The Weekend Quiz – October 13-14, 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. Assume that inflation is stable, there is excess productive capacity, and the central bank maintains its current monetary policy setting. In this situation, if government spending increases by $X dollars and private investment and exports are unchanged nominal income will continue growing until the sum of taxation revenue, import spending and household saving rises by more than $X dollars because of the multiplier.

2. When a government such as the US government voluntarily constrains itself to borrow to cover its net spending position, it substitutes its spending for the borrowed funds and logically reduces the private capacity to borrow and spend.

3. When the national government's budget balance moves into deficit, we know that the government is trying to stimulate the economy.

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    This Post Has 14 Comments
    1. Same as you Larry, 2 out of 3.
      I’m still not au fait with some of these terms.
      But, wait till the new Macro textbook comes out …

    2. Hmmm – I agree – last two okay. First one tricky.

      Not sure about first one though. I thought it would be true. But can the leakages to imports, savings and tax rise by MORE than the $X put in? They aren’t recycled back into the system like the domestic consumption spending is in each period – once they are lost they are lost….. so the impact can’t be more than the increase in autonomous spending? Am I on the right track????

    3. Tricksy. I’m usually caught by what Bill means with a certain word or concept (which is why I dislike multiple choice), and I have yet to delve into the math ones (I need more rigorous study), but these are more like the summary of MMT.
      The first question, SPOILERS, the key is a word near the beginning. FURTHER SPOILER: excess.

    4. Bill, I was going to suggest that you have 2 quizes. The one you uave now. And simpler one for new people or ‘dummies’.
      I suggest this because the recent ones have been too hard for me with their double think hidden things.

    5. Steve, I love the quiz because the harder it is, the more I get wrong and then the more I argue about it. I’m definitely weird. Anyways, I think Bill spends most of his week being a humanistic saintly type and then balances that out a bit with somewhat sadistic (but educational) quiz questions on the weekends. An easier quiz would not serve that purpose at all.

    6. 3 out of 3

      Q1 nominal raises until productive capacity is reached, so false

      Q2 government constraining borrowing does not constrain private borrowing

      Q3 no, the government could move into deficit due to circumstances the government cant control, such as a recession

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