Quiz #218 answers

• 1. The government can run budget surpluses and still satisfy the private domestic sector desire to save overall as long as the external sector is in surplus.

Answer: False

• 2. Central bankers are talking about the possible need for more quantitative easing to ease the aggregate demand losses associated with the implementation of fiscal austerity programs. However QE cannot be compared to a net fiscal injection because it creates no new net financial assets in the currency of issue.

Answer: True

• 3. The expansionary impact of deficit spending on aggregate demand is lower when the government matches the deficit with debt-issuance because then excess reserves are drained and the purchasing power is taken out of the monetary system.

Answer: False