Quiz #106 answers

• 1. Eurozone nations can only alter their international competitiveness by reducing domestic wages and prices because they no longer have a floating currency.

Answer: False

• 2. Modern Monetary Theory (MMT) refutes the claim that government spending can crowd out private spending.

Answer: False

• 3. In general, the OECD and IMF estimates of the impact of the automatic stabilisers are biased downwards.

Answer: True

• 4. If there is an external deficit, efforts by the private domestic sector to increase its overall saving as a percentage of GDP, will ensure the government budget is in deficit, irrespective of what the government desires.

Answer: True

• 5. Premium Question: When a government runs a continuous budget deficit public spending builds up over time and eventually exposes the economy to inflation risk.

Answer: False