Quiz #122 answers

• 1. Irrespective of what the government does, the private domestic sector can save overall, as long as the net exports are positive.

Answer: False

• 2. The payment to the private banks on reserves they hold with the central bank reduces their incentive to advance credit to the private sector.

Answer: False

• 3. An indicator of the impact the recession has had on credit creation is the fact that the growth of bank reserves and the growth in the stock of money have not followed a similar path in recent years. (NOTE: the inclusion of the word not before followed - July 27, 2011 - to reflect valid comments from readers. Original wording was an oversight).

Answer: True

• 4. Rising government net spending (budget deficit) indicates that the government fiscal stance is becoming more expansionary.

Answer: False

• 5. Premium Question: Greece will only start to reduce its public debt ratio when the government can run primary budget surpluses.

Answer: False