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The Weekend Quiz – February 16-17, 2019

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. Which scenario represents a more expansionary outcome:
  • (a) A fiscal deficit equivalent to 2 per cent of GDP (including the impact of automatic stabilisers equivalent to 1 per cent of GDP).
  • (b) A fiscal deficit equivalent to 2 per cent of GDP completely 'structural' in nature.
  • (c) A fiscal deficit of equivalent to 3 per cent completely 'cyclical' in nature.
  • (d) You cannot tell because of the different cyclical and structural components in the previous options.

2. If net exports are running at 2 per cent of GDP, and the private domestic sector overall is saving an equivalent of 3 per cent of GDP, the government must be running a surplus equal to 1 per cent of GDP.

3. A nation can export less than the sum of imports, net factor income (such as interest and dividends) and net transfer payments (such as foreign aid) and run a government surplus:

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    This Post Has 9 Comments
    1. Got the first one wrong, but probably only because at the time of my answer there are two questions marked as “c)” ;)

    2. 3 out of 3.


      I have just found a poll that more than a majority of economists do not support minimum wage of 15 USD.

      Does anyone know if economists even like the idea of a minimum wage?

    3. Tom,

      The orthodox-neoclassical economic approach may not support a minimum wage at 15, but we have to remember that Bill and other MMTers are part of a heterodox school.
      They answer this question in the Modern Monetary Theory and Practice:

      “the neoliberal conclusion that raising wages to cause unemployment is the answer if one views the question within the neoclassical paradigm. In that paradigm, prices ration resources, and at higher prices, there will be less demand. As wages rise, employers want fewer workers. It makes sense to argue that unemployment rises.

      However, within the heterodox paradigm, what matters is aggregate effective demand. Higher wages mean more income and more sales, hence firms want more workers. The net effect of a wage hike could be more employment.”

      So it depends on what paradigm you subscribe to. I’m assuming that Bill would support a Job Guarantee that pays a minimum wage of 15 instead of just a minimum wage. That doesn’t mean he is against min wage if it’s more politically feasible than a JG.

    4. Agh! 2 out of 3.

      No 1 was wrong, but I think I’m running up against a lack of formal economics education and technical knowledge – structural(??) vs. cyclical – so looking forward to the explanation.

      Relieved to have got the last two right though, phew!

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