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Saturday Quiz – September 19, 2009

Welcome to the billy blog Saturday quiz. The quiz tests whether you have been paying attention over the last seven days.

See how you go with the following five questions. Your results are only known to you and no records are retained.

1. If the national government is running a daily deficit then at the end of each day you have a positive stock of government net spending.



2. If public employment and private employment growth match the growth in the labour force, then unemployment cannot rise.



3. If a country runs a permanent external deficit (current account), and its government aims to balance its budget (on average) over the course of a business cycle (peak to peak in GDP), then it means that the government also wants the private domestic sector to run deficits (spend more than they are earning and increase their debt obligations) over the same business cycle.



4. It is clear that as the population ages, we will reach some point when the non-government sector will begin to dis-save because individuals no longer have any need to accumulate assets for future consumption. This will mean the government will have to run surpluses as a matter of national accounting.



5. The unemployment rate will remain stable if the sum of public and private employment growth is equal to the growth in the labour force.





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    This Post Has 2 Comments
    1. Dear Bill,

      I have an issue with question 5 and I think it is based on the word ‘stable’. Lets say we initially have 100 people in the labour force, 94 are employed, 6 unemployed and there is an unemployment rate of 6%. In the next period, 100 new entrants join the labour force and they all become employed. There are now 200 in the labour force, 194 employed, 6 unemployed and an unemployment rate of 3%. I see the number of unemployed persons as steady, but the unemployment rate unsteady (changed).

      Cheers,
      Anthony

    2. Dear Anthony

      Yes I agree. I have now changed the question wording now so that it reads as I intended and the answer is correct.

      So your comment is understood – the original question wording was “The unemployment rate will remain stable if the sum of public and private employment growth is sufficient to absorb the new entrants into the labour force”.

      It is now “The unemployment rate will remain stable if the sum of public and private employment growth is equal to the growth in the labour force.” Then the answer is unambiguous.

      Thanks for that.

      best wishes
      bill

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