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The Weekend Quiz – February 23-24, 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. A Fiscal Risk index which measures the vulnerability of a nation to public debt default is never applicable to a national government which issues its own floating currency.

2. All voluntary legal constraints aside, the central bank cannot directly purchase treasury debt to facilitate the national government’s fiscal deficit (that is, 'monetise the deficit') if it targets a positive short-term policy rate.

3. If the household saving ratio rises and there is an external deficit, then Modern Monetary Theory tells us that the government must increase net spending to fill the resulting increase in the non-government spending gap or else national output and income will fall.

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    This Post Has 5 Comments
    1. Bill, are you sure that your answer to #1 is correct? If it is I am missing something again. Oh well- not the first time that has ever happened. Thanks for the quiz.

    2. 3/3- but I’m barely grasping at understanding the terminology- argh! I’m a high school economics teacher by default, meaning I was never trained in the topic, but feel morally obligated to teach a more hopeful story. I appreciate your background, the dedication to popular education, and your attempts at light-hearted humor (though, most of it is over my head I admit). I’m happy to have found you now. I googled MMT after reading an article about Venezuela by Ellen Brown of the Public Banking Institute. It made sense to me.

    3. Lance

      Issuing a currency and issuing debt are different. A sovereign government can issue its own currency, but it can issue debt in a foreign currency, in which case there is the possibility of default.

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