Welcome to weekend quiz. Quiz Test if you’ve been following my blog posts. See how you answered the following questions. Your results are known only to you and no records are kept.
1. A fiscal deficit of 3% of GDP tells us that the government takes a less expansionary policy stance than a fiscal deficit of 5% of GDP.
2. When the government borrows from the non-government sector to match the increase in net public spending, the initial increase in aggregate demand is smaller than if there were no bond sales.
3. 3. Consider the table below, which describes the behavioral parameters associated with aggregate demand leakage for four different economies. It is assumed that all four economies have spare capacity, central banks keep all interest rates unchanged, inflation is unchanged, and international competitiveness is unchanged.
Which economy will provide the largest national income dividend for a given discretionary expansion of government spending.
