1. Assuming the expenditure multiplier is greater than 1, deficit spending will have a greater impact on aggregate demand if there are no offsetting monetary operations by the central bank (government bond sales) draining the excess reserves created.
Answer: False
2. If the government achieves in reducing its net spending by say $10 billion, the net financial assets destroyed by this fiscal withdrawal could be replaced by the central bank engaging in a $10 billion quantitative easing program.
Answer: False
3. The non-government sector is wealthier when the government issues debt to exactly match ($-for-$) its increase in net public spending.
Answer: False
4. When a country runs an external surplus, the national government can safely run a budget surplus without impeding economic growth.
Answer: False
5. Premium Question: Which budget deficit outcome is the most expansionary?