Quiz #112

• 1. As long as employment growth keeps pace with labour force growth, unemployment will not rise.
• False
• True
• 2. When a government issues debt it creates more non-inflationary space for itself to spend than if it spent without issuing debt.
• False
• True
• 3. The non-government sector is wealthier when the government matches it deficit with new debt issues.
• False
• True
• 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:
• Be running a deficit equal to 5 per cent of GDP.
• Be running a deficit equal to 1 per cent of GDP.
• Be running a surplus equal to 5 per cent of GDP.
• Be running a surplus 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.
• False
• True

Quiz #112 answers

• 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.

Answer: False