Quiz #170 answers

• 1. An external surplus is a necessary but not sufficient condition for a nation that wishes to grow during a period of fiscal surpluses and private domestic deleveraging.

Answer: True

• 2. If central banks stopped paying a return to the private banks on the reserves they hold with the central bank then the private banks would have a greater incentive to advance credit to the private sector.

Answer: False

• 3. Spain has reduced its budget deficit over the last 12 months through austerity. A declining deficit indicates that the government fiscal stance is becoming more contractionary.

Answer: False

• 4. A central bank running a policy rate of near zero could always directly purchase Treasury debt to facilitate the governments budget deficit without compromising its monetary policy stance.

Answer: False

• 5. Premium Question: The Eurozone countries will only start to reduce their public debt ratio when the respective governments succeed in running primary budget surpluses (that is, spending net of interest payments is less than taxation revenue).

Answer: False