Quiz #232 answers

• 1. A rising budget deficit indicates an expansionary shift in government policy and the challenge is to ensure the nominal demand stimulus does not exceed the real capacity of the economy to respond by increasing real output.

Answer: False

• 2. The central bank can influence the supply of money via the price it provides reserves to the commercial banks but this influence is compromised by the level at which it sets the target monetary policy rate.

Answer: True

• 3. If the private domestic sector spends less than it earns overall and the nation runs a small external deficit, then the government can never achieve a budget surplus no matter what the level of national income.

Answer: True