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The Weekend Quiz – March 9-10, 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 central bank can pay any rate on excess reserves to the commercial banks that it chooses independent of its other monetary policy settings.

2. Only one of the following propositions is possible (with all balances expressed as a per cent of GDP):

3. Modern Monetary Theory (MMT) demonstrates that mass unemployment arises from deficient aggregate demand which calls for an increase in the fiscal deficit to correct the deficiency. This observation is totally at odds with the mainstream view that unemployment can be reduced by cutting real wages relative to productivity.

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    This Post Has 6 Comments
    1. It’s a confusing world. This from a Krugman New York Times op ed. “After all, that big tax cut for the wealthy reduced national savings.” ??? I thought deficit dollars, as an accounting identity, increased savings in the non government sector, dollar for dollar. Anyway, Krugman criticizes President Trump’s tariff policy in this op ed. And he writes that deficits are not a real problem. At least right now. It’s like he gets to the right policy but uses the wrong economics to get there. I know I’m being parochial, but as an American citizen who follows your MMT macro, and believes it to be true, if you can get the opportunity please explain to me how Krugman manages to get policy right with what I’m sure is flawed neoliberal economics. And as for Venezuela I look forward to your analysis. The ‘news’ here is so slanted, one has no hope of sorting out how that sorry nation can escape it’s misery.

    2. Christopher,

      I am guessing Krugman, like most mainstream economists, take into account the government balance when accounting for “national savings”. (T-G) = “Public savings”. It is to MMT’s credit to have denounced the notion of “public savings” as something of a completely different nature as “private savings”.

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