1. As long as employment growth keeps pace with labour force growth, unemployment will not rise.
Answer: False
2. When a government issues debt it creates more non-inflationary space for itself to spend than if it spent without issuing debt.
Answer: False
3. The non-government sector is wealthier when the government matches it deficit with new debt issues.
Answer: False
4. If net exports are running at 2 per cent of GDP, and the private domestic sector overall is saving an equivalent of 3 per cent of GDP, the government must:
Answer: Be running a deficit equal to 1 per cent of GDP.
5. Premium Question: Fiscal austerity programs (which try to create primary budget surpluses) are likely to thwart the chances of a government reducing its public debt as a proportion of GDP because they are likely to reduce real GDP growth which, then drives the budget deficit up via the automatic stabilisers.