Question #85

It is argued that the deleveraging of the Japanese private sector helped Japan avoid recession in the 1990s because the increased savings provided the finance for the huge budget deficits.

• This statement is partially correct because even though the government doesn't need to finance its deficits it still needs the fiscal space to net spend.
• This statement is correct because the private saving does free up real resources that can be bought by the government and in this sense can be thought of as financing the deficit.
• This statement is incorrect because the saving intentions of the private sector would have been thwarted if the government deficits had not have provided enough spending to allow the economy to grow.

Answer #817

Answer: This statement is incorrect because the saving intentions of the private sector would have been thwarted if the government deficits had not have provided enough spending to allow the economy to grow.

Explanation

Go to D for debt bomb; D for drivel to learn more or post a comment if you need more information.