Quiz #166 answers

• 1. When an economy is running a current account deficit, national income movements will ensure that only one of the two remaining sectors (government and private domestic) end up spending 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 (credit lines etc) that central banks maintain means that the monetary base always adjusts to the changes in the money supply.

Answer: True

• 4. Over the last two decades, there have been major redistributions of national income towards profits in many nations. This has occurred as a result of the suppression of real wages growth.

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