The Weekend Quiz – November 27-28, 2021

1. When the government matches its deficit with debt-issuance it changes the portfolio of wealth held in the non-government sector. The impact on purchasing power is equivalent to a leakage from the expenditure system (akin to taxation, saving or imports) which reduces the expansionary impact of the government deficit spending.

2. A public employment guarantee program, which required workers to attend a government centre each day and do jigsaw puzzles, will have the same impact on national income as when a private company hired workers to build cars to meet market demand and are paid an equivalent wage.

3. A fiscal deficit of 2 per cent of GDP is less expansionary than a deficit of 3 per cent of GDP.