Quiz #157 answers

• 1. The private domestic sector cannot save if a nation's external sector is in balance (and thus making no contribution to real GDP growth) and the government runs a balanced budget.

Answer: False

• 2. If we observed yields on 10-year bond yields rising it would be incorrect to conclude that bond markets are demanding increased risk premiums for these assets.

Answer: True

• 3. If the household saving ratio rises and there is an external deficit then government must increase net spending to fill the private spending gap or else national output and income will fall.

Answer: False

• 4. Modern Monetary Theory challenges the notion of the money multiplier but still accepts that continually expanding the money supply will inevitably be inflationary.

Answer: False

• 5. Premium question: By voluntarily issuing debt to match its net spending, government borrowing from the private sector reduces the risk that public deficits will be inflationary.

Answer: False