Quiz #228

• 1. If the trend to austerity led to all national governments simultaneously running public surpluses then it would be impossible for all their respective private domestic sectors to save overall.
• False
• True
• 2. Which budget deficit outcome is the most expansionary?
• 1 per cent of GDP
• 2 per cent of GDP
• 3 per cent of GDP
• We need to know the structural and automatic stabiliser components before we can answer
• 3. When the government matches its deficit with debt-issuance it changes the portfolio of wealth held in the non-government sector. The impact on purchasing power is equivalent to a leakage from the expenditure system (akin to taxation, saving or imports) which reduces the expansionary impact of the government deficit spending.
• False
• True

Quiz #228 answers

• 1. If the trend to austerity led to all national governments simultaneously running public surpluses then it would be impossible for all their respective private domestic sectors to save overall.

Answer: True

• 2. Which budget deficit outcome is the most expansionary?

Answer: 3 per cent of GDP

• 3. When the government matches its deficit with debt-issuance it changes the portfolio of wealth held in the non-government sector. The impact on purchasing power is equivalent to a leakage from the expenditure system (akin to taxation, saving or imports) which reduces the expansionary impact of the government deficit spending.

Answer: False