Quiz #100 answers

• 1. If a sovereign national government runs a balanced budget (on average) over a business cycle, then the average private domestic deficit (surplus) will always be exactly equal to the average external deficit (surplus) over the same cycle.

Answer: True

• 2. Excessive real wages growth can cause unemployment.

Answer: True

• 3. For workers to get a rising share of national income their nominal wages have to grow faster than inflation.

Answer: False

• 4. Modern Monetary Theory implies that higher levels of taxation are not necessary for the government to spend more in real terms.

Answer: False

• 5. Premium question: After a deep recession, governments wanting to reduce their unemployment rates should use expansionary fiscal policy to get real GDP growth back on trend.

Answer: Maybe