Saturday Quiz – May 15, 2010
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.
Well, I am lost again. If S=I+(EXP-IMP)+(G-T) …
… how can a government surplus, destroying financial assets (either debt or cash), “offset” a current account deficit, resulting in net capital outflows (official or private sector)?
The offsetting positions are a government surplus and current account surplus, or government deficit and current account deficit. An equal government surplus and current account deficit are not offsetting, they are reinforcing.
Dear Bruce
I agree with you about the wording. I should have written “accompanied by a budget surplus of equal proportion to GDP”.
However, I don’t think it leads the analysis astray in any way.
best wishes
bill