Quiz #108 answers

• 1. A declining budget deficit tells us that the government is pursuing a more contractionary fiscal policy stance.

Answer: False

• 2. If the household saving ratio rises and there is an external deficit then government must increase net spending to fill the private spending gap or else national output and income will fall.

Answer: False

• 3. Imposing some positive minimum reserve requirements for private banks provides some constraint on their credit creation activities.

Answer: False

• 4. Real government spending can be higher if they raise more tax revenue.

Answer: Maybe

• 5. Premium Question: When a currency-issuing government voluntarily constrains itself to borrow from the private sector to cover its net spending (deficits) position, it substitutes public spending for the borrowed private funds which reduces the funds available for private sector borrowing.

Answer: False