The Weekend Quiz – November 17-18, 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. Imagine that macroeconomic policy is geared towards keeping real GDP growth on trend. Assume this rate of growth is 3 per cent per annum. If labour productivity is growing at 2 per cent per annum and the labour force is growing at 1.5 per cent per annum and the average working week is constant in hours, then this policy regime will result in:




2. Students are taught that the macroeconomic income determination system can be thought of as a bath tub with the current GDP being the water level. The drain plug can be thought of as saving, imports and taxation payments (the so-called leakages from the expenditure system) while the taps can be thought of as investment, government spending and exports (the so-called exogenous injections into the spending system). This analogy is valid because GDP will be unchanged as long as the flows into the bath are equal to the flows out of it which is tantamount to saying the the spending gap left by the leakages is always filled by the injections.



3. Assume the current public debt to GDP ratio is 100 per cent and that the nominal interest rate and the inflation rate remain constant and zero. Under these circumstances it is impossible to reduce a public debt to GDP ratio, using an austerity package if the rise in the primary fiscal surplus to GDP ratio is always exactly offset by negative GDP growth rate of the same percentage value.





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    6 Responses to The Weekend Quiz – November 17-18, 2018

    1. Jerry Brown says:

      Difficult quiz this week. Apparently I got #3 wrong. So I will be very interested in the answers to see if I can twist the question or the answer enough so that I wasn’t necessarily wrong. I got no idea why I got it wrong at the moment so thinking about arguing measurement errors. Unless it turns out I was actually correct…

      Thanks for the quiz.

    2. Lance says:

      Two outa three! No2 wrong. In my inimitable fashion, I took a wild guess. Wrong!

    3. Robert Morgan says:

      Yep… pretty much a mind scramble but 2 out of 3…
      really enjoying these brain teasers…. :)

    4. Mr Shigemitsu says:

      3 out of 3, for 2 weeks running!

      This comes as a bit of a surprise tbh. Encouraging, because my strategy was to just go with instinct and not to overthink the questions, but I’m also wondering if it could just be pure chance, and it’ll be 0 out of 3 next week.

    5. HermannTheGerman says:

      Wow, my fist 100%!

      However, I was unsure about the terminology at times and worried if I had made the right assupmtions. I’m intrigued to see if I’m learning something substantioal or if my guesses are just getting less wild.

      Cheers!

    6. Cs says:

      2/3
      Number 2 wrong. Bit baffled.

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