Quiz #195 answers

• 1. A program of fiscal austerity which drains aggregate demand growth may not undermine attempts by the private domestic sector to reduce its indebtedness.

Answer: True

• 2. Governments concerned with their public debt ratio should encourage growth because the debt ratio falls once economic growth resumes.

Answer: False

• 3. The money multiplier is in fact more correctly considered to be a divisor relating the monetary base to the money supply.

Answer: True

• 4. A nation can run a current account deficit accompanied by a government sector surplus of equal proportion to GDP, while the private domestic sector is spending more than they are earning.

Answer: True

• 5. Premium Question: Government deficit spending would have a greater expansionary impact on aggregate demand if the central bank bought the public debt to match the deficit instead of a situation where the government matches it deficit by issuing debt to the private sector.

Answer: False