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The Weekend Quiz – November 3-4, 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. Nations with external deficits operate within the constraint that national income movements will ensure that the two remaining sectors (government and private domestic) will spend more than they receive, irrespective of the GDP growth rate.

2. Modern Monetary Theory (MMT) makes a crucial distinction between the issuer of the currency and the user of that currency. Unlike a household, which not only has to service its debt obligations over the course of the loan but also has to repay them at the due date, a national government, which issues its own currency can always roll over its "own currency" debt obligations and never has to pay them back.

3. Governments concerned with their public debt ratio should encourage growth because the debt ratio falls once economic growth resumes.

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    This Post Has 6 Comments
    1. 3/3

      Would love to see the solutions.

      For Q2, I just don’t think that kind of language applies to government with its own currency. The question implies that the government cant pay its debts at will.

      For Q3, public debt ratio is dependent on GDP growth and public debt. You can sell alot of treasury bonds and make public debt go up faster than GDP growth; in which case, you have growth, but still an increasing debt ratio.

    2. You might be aware of a video put up by Martin North interviewing John Adams. Adams seems to have been an adviser for Arthur Sinodinos. I think he is saying he is an Austrian but kept on alleging MMT was about printing money and how that would devalue the currency as the public lost confidence in it. He also insisted that the Job guarantee would not work. More importantly he made mention of one or two members or parliament were interested in MMT but he set them straight. You could check it out – its called the Madness of MMT but probably better to ignore it.

    3. Lance,
      I think Q1 depends on how you interpret “(government and private domestic)”. If you think this means both combined the answer is true. If you think this means each individually the answer is false. I am not an English major but IMO the wording is of the question could have been better.

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