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The Weekend Quiz – February 20-21, 2021

Summary:
Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained. 1. Central banks provide reserves to the commercial banking system usually at some penalty rate. However, this compromises their capacity to target a given monetary policy rate.TrueFalse2. If the real interest rate (difference between nominal interest rate and inflation) is constant, then a currency-issuing government, which matches its net spending $-for-$ with debt issuance, could double its fiscal deficit without pushing up the public debt ratio.TrueFalse3. Assume that inflation is stable, there is excess productive capacity, and the central bank

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Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.

The Weekend Quiz – February 20-21, 2021

1. Central banks provide reserves to the commercial banking system usually at some penalty rate. However, this compromises their capacity to target a given monetary policy rate.



2. If the real interest rate (difference between nominal interest rate and inflation) is constant, then a currency-issuing government, which matches its net spending $-for-$ with debt issuance, could double its fiscal deficit without pushing up the public debt ratio.



3. Assume that inflation is stable, there is excess productive capacity, and the central bank maintains its current interest rate target. If on average the government collects an income tax of 20 cents in the dollar, then total tax revenue will rise by 0.20 times $x if government spending increases (once and for all) by $X dollars and private investment and exports remain unchanged.





Bill Mitchell
Bill Mitchell is a Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the University of Newcastle, NSW, Australia. He is also a professional musician and plays guitar with the Melbourne Reggae-Dub band – Pressure Drop. The band was popular around the live music scene in Melbourne in the late 1970s and early 1980s. The band reformed in late 2010.

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