Quiz #206

• 1. An advantage of budget deficits is that the non-government sector becomes wealthier when a sovereign government issues debt that is purchased by private wealth holders.
• False
• True
• 2. In a fixed coupon government bond auction, the higher is the demand for the bonds the lower the yields will be at that asset maturity which suggests that higher budget deficits will eventually drive short-term interest rates down.
• False
• True
• 3. In a situation where the private domestic sector decides to lift its saving ratio, the economy can still grow even if the national government had decided to impose fiscal austerity.
• False
• True

Quiz #206 answers

• 1. An advantage of budget deficits is that the non-government sector becomes wealthier when a sovereign government issues debt that is purchased by private wealth holders.

Answer: False

• 2. In a fixed coupon government bond auction, the higher is the demand for the bonds the lower the yields will be at that asset maturity which suggests that higher budget deficits will eventually drive short-term interest rates down.

Answer: False

• 3. In a situation where the private domestic sector decides to lift its saving ratio, the economy can still grow even if the national government had decided to impose fiscal austerity.

Answer: True