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Saturday Quiz – October 24, 2009

Welcome to the billy blog Saturday quiz direct from Almaty, Kazakhstan. 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. Maintaining a peg against another currency means that monetary policy and fiscal policy work against each other.

2. Modern monetary theory tells us that expansionary fiscal policy in an emerging economy can always improve living standards.

3. The problem with private home mortgages being written in a foreign currency, is that if the home currency depreciates that home owner can end up with negative equity in their homes in terms of the foreign currency.

4. Given that the US federal government is legally required to issue debt $-for-$ to match its net spending, if foreign countries especially China stopped buying the debt the government would have to cut back its spending proportionally.

5. The modern monetary theory statement that governments borrow back their own spending is true but the assumption underlying it is that the purchasers of the debt do not use funds borrowed from their banks to buy the debt.

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