Quiz #141 answers

• 1. When an economy is running a current account deficit, national income movements will ensure that only one of the two remaining sectors can spend less than they receive, irrespective of the GDP growth rate.

Answer: True

• 2. Unlike a household which not only has to service its debt obligations over the course of the loan but also has to repay them at the due date, a national government debt, which issues its own currency can always roll over its "own currency" debt obligations and never has to pay them back.

Answer: False

• 3. Standing facilities that central banks maintain means that the monetary base always adjusts to the changes in the money supply.

Answer: True

• 4. A redistribution of national income towards profits occurs when nominal wages growth lags behind the inflation rate.

Answer: False

• 5. Premium Question: While Modern Monetary Theory (MMT) indicates there is no particular economic or financial significance of a rising public debt ratio for a sovereign currency-issuing nation it recognises the political constraints that governments operate within. Accordingly, it recognises there is a trade-off between the need to run budget surpluses to reduce the public debt ratio and the political problems that austerity brings.

Answer: False