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The Weekend Quiz – October 30-31, 2021

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. Assuming the expenditure multiplier is greater than 1, if the government increases its deficit they will have a greatest impact on aggregate demand if there are no offsetting monetary operations by the central bank (government bond sales) draining the excess reserves created.

2. If the government achieves in reducing its fiscal deficit by say $10 billion, the net financial assets destroyed by this withdrawal could be replaced by the central bank engaging in a $10 billion quantitative easing program.

3. Which government deficit outcome is the most expansionary?

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