Quiz #105 answers

• 1. Modern Monetary Theory tells us that a sovereign national government can run deficits without issuing debt. But the debt issuance allows the government to drain demand (private spending capacity) so that the public spending has more non-inflationary room to work within.

Answer: False

• 2. Workers can enjoy a stable share of GDP over time if they secure wage increases in line with the growth in their contribution to production.

Answer: False

• 3. The ratio of the "stock of money" (currency plus demand deposits) to bank reserves has fallen dramatically in the US in recent years. This tells us that the money multiplier is not constant.

Answer: False

• 4. The level of tax revenue has no bearing on the real spending capacity of a sovereign government.

Answer: False

• 5. Premium Question: The government and the private domestic sectors cannot simultaneously reduce their debt levels (under current public sector debt-issuance arrangements)

Answer: False