Quiz #208 answers

• The accumulated stock of government spending associated with continuous budget deficits can increase the risk of inflation faced by an economy.

Answer: False

• If a nation was running a current account deficit and a budget surplus equal to 2 per cent of GDP, we would always observe that the private domestic sector was spending more than it is earning.

Answer: True

• When the government issues debt to match its budget deficit $-for-$ (or whatever currency unit is relevant) it also increases the net worth of the non-government sector.

Answer: False