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Saturday Quiz – November 14, 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. A current account surplus drains aggregate demand because the nation is giving away more of its real resources than it is getting back from foreigners.

2. Income adjustments would force the government to run a deficit equivalent to 8 per cent of GDP if the private domestic sector was spending less than its income by an amount equivalent to 5 per cent of GDP and the country was running a current account surplus of only 3 per cent of GDP.

3. The fundamental flaw in all the mainstream macroeconomic models that construct the the business cycle as being the outcome of shifts in the labour supply is that actual quit behaviour by workers rises during a boom and declines during a recession.

4. Australia's October Labour Force Survey data shows that employment increased by 24,500 thousand persons in the last month by total hours worked in that month fell by about 1.7 per cent. Given GDP growth is now growing again, this means that labour productivity growth (GDP per worker) must have jumped up as well in the last month because less working hours are being required to produce more output.

5. Imagine the national government ran a surplus (tax revenue greater than spending) last year of say $20 billion and then electronically deposited the sum in a local commercial bank such that it now had a $20 billion bank balance in the private sector. This is one example where a budget surplus would contribute to national saving and allow the government to purchase more next period for a given tax take.

Saturday Quiz – November 14, 2009

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