Week Four - Quiz Time

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Now, let's see if you were paying attention.

The following questions will be about the material that we have been unpacking and discussing this week. There is a little bit of number-crunching, so you might want to have your calculator ready.

So get your pencil and paper out and record your answers. Once you are finished you can check the answers and explanations. It is obviously best to do the quiz first to test your progress before checking the results. There are no prizes here.

Take your time, and best of luck!

Question 1: The MMT classification of exports as a cost means:

1. Currency-issuing governments are not financially constrained.
2. Foreign spending into the local economy can be inflationary.
3. The resources that are embodied in exports are lost to the nation and are, instead, used by foreigners to enhance their material prosperity.
4. Government debt interest payments have to be serviced.

Question 2: A rising child dependency ratio:

1. Will ultimately lead to a falling standard dependency ratio once birth rates decline.
2. Means that people of retirement age are increasing at a faster rate than children.
3. Means that child care centres are becoming more dependent on government support.
4. Means the aged dependency ratio is falling.

Question 3: When a nation’s exchange rate depreciates:

1. The nation’s inflation rate accelerates.
2. Imported motor vehicles become cheaper for residents to buy.
3. Foreigners stop coming to the nation for holidays.
4. Imported goods become more expensive in the local currency.

Question 4: When a nation’s exchange rate appreciates, the debt servicing payments for debt denominated in a foreign currency:

1. Fall in local currency terms.
2. Rise in local currency terms.
3. Are unchanged in local currency terms because the payments are fixed by contract.
4. Rise because foreign governments require higher payments.

Question 5: A nation will become more competitive in international trade if (more than one option can be correct):

1. Its nominal exchange rate is unchanged, but its inflation rate falls relative to other nations.
2. Its nominal exchange rate is unchanged, but its inflation rate rises relative to other nations.
3. Its nominal exchange rate appreciates, but its inflation rate is unchanged relative to other nations.
4. Its nominal exchange rate depreciates, but its inflation rate is unchanged relative to other nations.

You can access the answers and detailed analysis from this page - The Weekend Quiz – November 5-6, 2022 – answers and discussion (November 5, 2022).