Quiz #230 answers

• 1. Nations with external deficits operate within the constraint that national income movements in response to aggregate spending will ensure that the two remaining sectors (government and private domestic) will spend more than they receive, irrespective of the GDP growth rate.

Answer: False

• 2. Modern Monetary Theory (MMT) makes a crucial distinction between the issuer of the currency and the user of that currency. Unlike a household, which not only has to service its debt obligations over the course of the loan but also has to repay them at the due date, a national government, which issues its own currency can always roll over its "own currency" debt obligations and never has to pay them back.

Answer: False

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

Answer: False